I have a portfolio with cash and marketable securities, a benchmark, and a desire to calculate its Sharpe ratio. However, this portfolio has cash outflows. Sometimes securities are sold to produce the cash outflows. When calculating historical statistics, these statistics are affected by these instances of sold securities.
How can I adjust my calculation of these historical statistics to not be affected by these transactions? I want my statistics to be reflective of the portfolio manager's actions of asset allocation and have their actions diminished by cash outflows of the portfolio.
Should I adjust the benchmark in the same manner my portfolio was affected? For example, the cash outflow decreased the net (net of performance in the markets) market value of the portfolio by 5% two days ago. Should I decrease the benchmark by the change in the benchmark performance minus 5%?