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> Internally, hedge funds backtest against measures such as IR (information ratio) and not against returns. IR penalizes for volatility and rewards consistency.
by throwawaymath 8y ago
> Internally, hedge funds backtest against measures such as IR (information ratio) and not against returns. IR penalizes for volatility and rewards consistency.
Hedge funds are not a homogenous enough group to make a blanket statement like this.
- echion 8y agoAll generalizations are over-generalizations? GP is a fair comment, actually: nobody that knows anything about how risk works wants to see a returns number. If a fund doesn't backtest against IR, or penalize for volatility, it's not going to be getting significant investments.