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Risk-Adjusted Return: Quarterly Update 2013 Q1
1. Economics Nobel Laureate William F. Sharpe developed the Sharpe ratio to measure risk-adjusted
investment return. The Sharpe ratio allows us to evaluate the performance of an asset in terms of
risk as well as excess return generated.
Risk-Adjusted Return: Quarterly Update
R Rf
Rf
Q1 2013
2. RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURN
ONE YEAR 31/03/2012 - 31/03/2013
Over the last year, Risk Parity has been the stand-out performer when measured on an excess return
and risk-adjusted basis. 8 of the top 9 sharpe ratios have been in fixed income. EMD Hard Currency,
UK Government Bonds (Index-Linked) and Developed Market Equities performed well when meas-
ured by excess return, however on a risk-adjusted basis they fall down the table. Conversly, Invest-
ment Grade Credit (US&UK) and Leveraged Loans (US) saw lower excess returns but on a risk-
adjusted basis they move up the table.
*See appendix for a list of benchmarks & definitions.
3. RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURN
THREE YEAR 31/03/2010 - 31/03/2013
Over this 3-year period, 8 of the top 9 best sharpe ratios have been in fixed income, the exception
being Risk Parity. Emerging Market Equities and Developed Market Equities performed compara-
tively well when measured by excess return, however on a risk-adjusted basis they fall towards the
bottom end of the chart.
*See appendix for a list of benchmarks & definitions.
4. RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURN
FIVE YEARS 31/03/2008 - 31/03/2013
Over this 5-year period, 8 of the top 9 best sharpe ratios have been in fixed income, the exception
being Risk Parity. Developed Market Equities, HF Macro and Commodities saw returns below the
risk free rate over the period.
RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURN
*See appendix for a list of benchmarks & definitions.