Quote:
Originally Posted by ParkerBond
Sharpe and information ratio are similar calculations but measure different things. Sharpe measures absolute returns over volatility of the absolute returns.
Information ratio measures relative or excess returns (versus a benchmark) over the volatility of the relative/excess returns.
Active investment management is forecasting. Forecasting requires information. The information ratio measures the quality of the information you use to forecast.
A true information ratio of 3 is incredibly high assuming proper benchmarking. Information ratios over 1 are outstanding.
It makes me wonder if you really mean Sharpe. And if you mean information ratio, then it makes me wonder what your benchmark is.
Elsewhere in the thread he claimed his firm produced ~2x S&P500 returns with half vol. Depending on the time period (even during short 5 year spans, large cap equities can have realized Sharpe ratios above 1), a realized Sharpe and/or IR above 3 could be possible.
Of course, someone claiming an ex-ante or expected Sharpe ratio or information ratio of 3 (for the given AUM) is pretty ridiculous (even if you're Izzy E). Having a realized Sharpe and/or IR >3 for only a few years of operation sounds more plausible (and obviously is still impressive).
That said, I know this was an informal message board thread and some anonymity is to be expected, but OP's answers and content were pretty disappointing. Some explanations of basic stuff had me rolling my eyes a few times. Not questioning his talent/intelligence - just saying that he's not a great communicator. Not holding my breath for whatever book was in the works.