Window Dressing

Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of ASTD, ISPI, STC, and MTA.

What Is Window Dressing?

Window dressing is a strategy used by mutual fund and other portfolio managers to improve the appearance of a fund’s performance before presenting it to clients or shareholders. To window dress, the fund manager sells stocks with large losses and purchases high-flying stocks near the end of the quarter or year. These securities are then reported as part of the fund’s holdings.

The term can also refer to actions taken by companies to improve their forthcoming financial statement, such as by postponing payments or finding ways to book revenues earlier.

Key Takeaways

• Window dressing occurs when portfolio managers try to boost a fund’s investment performance prior to investor or shareholder presentations.
• It can be identified by carefully evaluating a firm or fund’s financial statements and looking for suspicious trades coinciding with the end of a quarter or fiscal year.
• Window dressing can give the appearance of better returns, but these strategies often simply defer losses that will materialize later on.

Window Dressing

How Window Dressing Works

Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter, and clients use these reports to monitor the fund’s investment returns. When performance has been lagging, mutual fund managers may use window dressing, selling stocks that have reported substantial losses and replacing them with stocks expected to produce short-term gains to improve the overall performance of the fund for the reporting period.

Another variation of window dressing is investing in stocks that do not meet the style of the mutual fund. For example, a precious metals fund might invest in stocks in a hot sector at the time, disguising the fund’s holdings and investing outside the scope of the fund’s investment strategy.

Example of Window Dressing

A fund investing in stocks exclusively from the S&P 500 has underperformed the index. Stocks A and B outperformed the total index but were underweight in the fund, while stocks C and D were overweight in the fund but lagged the index.

To make it look like the fund was investing in stocks A and B all along, the portfolio manager sells out of stocks C and D, replacing them with, and giving an overweight to, stocks A and B.

The act of window dressing is under close watch by investment researchers and regulators with potentially forthcoming rules that could require more immediate and greater transparency of holdings at the end of a reporting period.

Monitor Your Fund Performance

For investors, window dressing provides another good reason to monitor your fund performance reports closely. Some fund managers might try to improve returns through window dressing, which means investors should be cautious of holdings that seem out of line with the fund’s overall strategy.

Investors should pay close attention to holdings that appear outside of a fund’s strategy.

Window dressing can boost a fund’s returns in the short term, although longer-term effects on a portfolio are typically negative. While these holdings may show higher short-term performance, in the long run these types of investments drag on the portfolio’s returns, and a portfolio manager cannot often hide poor performance for long. Investors will certainly identify these types of investments, and the result is often lower confidence in the fund manager and increased fund outflows.

Who Engages in Window Dressing

Though disclosure rules are intended to aid in increasing transparency for investors, window dressing can still obscure the practices of the fund manager. A study by Iwan Meier and Ernst Schaumburg of Northwestern University found that certain characteristics of a fund can signal that the manager may be engaging in window dressing. Specifically, growth funds with high turnover and a manager who has recently posted poor returns are more often the ones who will window dress.

Window dressing also occurs across various other industries. For instance, companies can offer products at discounted prices or promote special deals that enhance sales for the end of the period. These promotional efforts seek to increase the return in the final days of a reporting period.

13 beautiful window dressing ideas

Looking for window dressing ideas? We can see why! Since the first humans moved out of their caves into manmade accommodation, windows have been essential for letting daylight in and allowing inhabitants to see out, if only to spy on what the neighbours are up to! It may be a cliche, but windows really are the eyes of your home and the way you dress them can make or break your room scheme. Not only does the design you choose need to be attractive, it will ultimately dictate the light that’s cast into the space, so a versatile window dressing is your best option.

First things first, begin by cleaning your windows before you start dressing them. Get rid of those cobwebs and sticky finger prints with a thorough wipe down so that they sparkle on the inside and out.

When it comes to bedrooms, blackout curtains are a popular option as they are lined to prevent extra light pouring into the room and spoiling your sleep. Similarly, roller blinds with a blackout lining are another great choice for bedroom windows.

Venetian blinds are a smart idea for kitchens and bathrooms, with varieties including metal, plastic and wood. These can be tilted to let more or less light in and for extra privacy, plus, they are easy to wipe clean. For conservatories, vertical blinds are a practical solution, but can look a little dated and roller blinds are often chosen in favour for a contemporary look.

For French doors or patio doors, thermal curtains are a good idea to keep your room cosy and warm. A stiffer curtain fabric will create an elegant drape, however, lighter voile curtains are ideal for teaming with blinds at windows that require a little extra privacy.

Alternatively, shutter blinds are a stylish selection with a continental feel. They’re available in many contemporary shades and materials to suit your scheme and similarly to blinds and curtains, can be made to measure to fit your windows.

1. Use roll up and Roman blinds

Roman blinds and roll-up varieties are a simple yet stylish solution for conservatory windows. They can be hung over each panel of glass and can be tied at different heights depending where the sun hits to create shade and prevent the room from getting too hot. Lighter colours will maintain a feeling of space and reflect heat, or why not choose a blind fabric to coordinate with other textiles in the room, such as upholstered furniture and accessories? This style offers such simplicity, you could even make one yourself with this simple Roman blind tutorial.

Stylist’s tips
For a luxe feel in a bedroom, try a real or faux silk or for a traditional look, opt for a crisp linen in stone or cream.

2. Use printed panels

French door blinds and curtains can be difficult to select, however these sheer panel curtains are a pretty pick for a vintage-inspired interior. Voile fabric panels featuring bold floral prints in coordinating colours have been joined to create beautiful sheer curtains that still let the light through. To further the country feel, hang using a narrow iron pole and small curtain rings to match.

Stylist’s tips
Team with a neutral blackout blind in a bedroom for added privacy during the daytime.

3. Use a cafe curtain

A dainty cafe curtain or half curtain is the perfect solution for a kitchen window. A voile fabric in a pretty print to coordinate with your kitchen scheme like this feather print fabric is ideal. This style of window dressing still lets in plenty of light but provides a little privacy if your kitchen window is at the front of the house where passers by may be able to look in. Cafe rods that fit easily into the window recess can be picked up for just a few pounds.

Stylist’s tips
Make your own cafe blind by cutting a long strip of voile fabric the length of your window, then hem the bottom edge and create a channel the width of your rod at the top.

4. Use shutters

The traditional shutter is an inspired and effortlessly stylish choice of window dressing and has become increasingly accessible. There are many different styles on offer, including full window shutters, the half cafe design and full solid shutters to completely block out light – ideal for bedrooms. For kitchens and bathrooms, opt for waterproof vinyl shutters to ensure water and humidity doesn’t damage your purchase over time. If you’re looking for value for money, crafted shutters are the way to go as these are made from medium density fibreboard, where as hardwood is the classic choice.

Stylist’s tips
Paint your shutters in a bold shade for a statement window dressing that coordinates with your unique room scheme.

5. Use sheer curtains

A modern take on traditional lace curtains, sheer curtains made from voile or chiffon fabric are an excellent option for dressing windows in rooms that you want to allow light into, but don’t want passers by to be able to see in like glazed outside doors or cloakrooms. Use a narrow rod that fits the frame so it’s virtually invisible and hem curtains just below the glass. Fit the curtains a pane or two from the top to let in light above where people can see in.

Stylist’s tips
Use a voile fabric with a subtle embroidered detail for a frosted effect – perfect for windows at the front of the house or bathrooms.

6. Use tie top curtains

Tab top curtains in a subtle print are a laid-back solution to dressing large bay windows. They’re easy to make yourself as you don’t need to attach curtain rings or hooks. They’re also easy to remove when you fancy a change as you just need to untie the tabs and swap to a new design. This style of window dressing works best with lightweight or sheer fabrics. Tab top curtains offer a similar look and are available readymade from many retailers.

Stylist’s tips
Select a pole in a coordinating colour to the windows and walls so it doesn’t detract from the soft nature of the curtains.

7. Use a wave heading

Soft waves of fabric create a smart but simple finish that’s easy on the eye. A wide Tempo heading pleat makes curtains fall in soft, regular waves, so they will always look just right. Team it with a sleek, modern suspension rail that the curtains glide below and let the curtains sit flush with the floor so they’ll look neat open or closed.

Stylist’s tips
A cut-velvet pattern adds a luxurious edge to this otherwise pared-down window treatment.

8. Use a double pole

A clever double pole design means you can hang both a sheer and a curtain around the bay window, but draw them independently. Brackets normally get in the way of curtain rings being pulled around a bay, but this design uses passing rings that allow the curtains to be drawn all the way round.

A standard heading tape left ungathered on both curtains creates a soft, informal effect. Keep the sheers sill-length for a neat finish and go for floor-length curtains to create real impact in a bay.

Stylist’s tips
Team a bold, modern, floral curtain fabric with a floral patterned voile for a modern take on a curtain and sheer.

9. Use a pelmet

For a contemporary take on a traditional curtain finish, use a flat pelmet layered over voile curtains sporting coordinating tie-backs. This style provides a neat finish to your windows as it hides curtain poles and other fixings. Recreate the look of a sophisticated hotel bedroom by selecting pillows to match your pelmet and tie-back fabric. Opt for a simple geometric print with a Moroccan vibe to echo the design of an ornately shaped pelmet, but keep colours fresh and neutral for a modern look.

Stylist’s tips
Install a venetian blind behind the pelmet for extra privacy and to keep light out of the bedroom when required.

10. Use single curtains

If you have a sequence of large windows in a room, choose single curtains instead of pairs hung centrally to give a contemporary, laid-back look. Omit holdbacks for a further relaxed feel, instead opting for a lightweight fabric such as linen as it gathers and drapes beautifully. Allow plenty of length on the curtains so they pool on the floor to complete the look.

Stylist’s tips
Use a narrow chrome pole with small curtain rings so as not to overpower the overall effect. Small curtain rings will also allow you to gather the curtains more tightly to let in more light in the absence of tie-backs.

11. Use blinds and curtains

Printed Roman blinds layered with plain curtains are an elegant way to dress a bedroom window. Go for a bold pattern that coordinates with your room scheme and choose a complementary plain fabric for the curtains. Combine with pretty tie backs for added detail to your window dressing. If your blind isn’t made from black-out material, or you’re especially sensitive to the light on bright mornings, the curtains can be drawn in addition to the blind at night time. For a contemporary look, choose a sleek metal pole and curtains with coordinating eyelets.

Stylist’s tips
Hang your blind within the window recess and install the curtain pole on the outside leaving a good gap above the top of the blind to provide a soft framing effect.

12. Use a leading edge

A curtain with a leading edge is a real show stopper. A contrasting fabric from the back of the curtain is continued to the front, and simple holdbacks allow even more of it to be on show when the curtains are open. Use a simple pencil pleat and an unfussy pole to keep all the attention on the curtains themselves.

You can enhance the effect of this stunning treatment by choosing a pole that’s slightly wider than the window, which tricks the eye into thinking that the window is bigger than it really is and allows you to hold the curtains back without blocking light.

Stylist’s tips
A satin-finish fabric for the leading edge gives it even more attention-grabbing shimmer.

13. Use panels

A fabric with a pretty illustration is a great way to dress up a window with an uninspiring view. Use plain fabric for two-thirds of the length, with the panelled pattern on the lower third. Create visual separation between the two with a ribbon braid, finishing off with a trim below.