Information Ratio
Excess return over the benchmark divided by the standard deviation of that excess return — a measure of the manager's skill and of the consistency with which the excess return is produced.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- AlphaThe return a fund earned above what its beta and the benchmark say it should have earned — the slice of performance left over once the market has been given credit for its share.
- Alpha returnThe return a portfolio earned over and above what CAPM says was required for the market risk it took — the part of performance not explained by the market.
- BenchmarkThe independently published index a scheme's performance is measured against, chosen to match its investment objective, asset allocation and strategy, and disclosed in the Scheme Information Document.
- BetaHow sharply a share moves relative to the market index — beta 1 moves with the index, above 1 amplifies it, below 1 dampens it. The standard measure of systematic risk.
- CAGRThe single smoothed annual rate at which a starting value would have to grow, compounding each year, to reach the ending value over a given period.
- Credit riskThe risk that a borrower fails to meet its obligations on a debt instrument — the risk credit rating agencies exist to grade, and the one that triggers a segregated portfolio in a mutual fund.
Where this is taught
- Series V-B · Chapter 7: Performance of Mutual Fundsintroduced here
- Series X-A · Chapter 16: Portfolio Performance Measurement and Evaluationintroduced here
- Series V-D · Chapter 11: Mutual Fund Scheme Performanceintroduced here
- Series V-A · Chapter 11: Mutual Fund Scheme Performanceintroduced here
Related terms
← All terms