In the curriculum, they say that Sharpe Ratio is one of the benchmarks you can use for hedgefunds, however, elsewhere I believe it also says Sharpe is not a good measurement when returns don’t follow a normal distribution… Can someone reconcile this contradiction? thanks.
People use it, but it has significant difficiences.
You must be referring to SS17 (pg 149) - I think they are saying that many people use it to measure HF performance but as ‘big ML’ states, it does have issues since HF do not have normal return distributions. My take frm SS17 is that it is appropriate so long as you are comapring similar funds (L/S equity fund vs another L/S equity fund) but it wouldn’t make sense to use a Sharpe to compare a L/S equity fund vs a Macro fund.