Dear mems,
I am studying volume 5, alternative investments,
the curriculum says that Sharpe ratio is a STAND-Alone measure. Coud you explain for why what does it mean by STAND-ALONE. It would be great help if you can take an example for me.
Million thanks!
From an asset-manager’s perspective , particularly in dealing with hedge fund investments , it can be hard to figure out how the investment fits into the overall portfolio in terms of risk and diversification .
Sharpe , as given by the hedge fund manager , is not a helpful measure , even compared to a sensitivity like beta ( which is itself mono-dimensional , but better than Sharpe , as it gives some indication of systematic risk )
You could only qualitatively compare two hf managers if all they give you is sharpe. one is better than another because sharpe is better. OK. but the one with lower sharpe could be better for the portfolio in terms of diversification and lower overall risk.