Persistence of Raw vs Risk-adjusted Returns

25Jul08

Thumbs up to CXO Advisory for their post Hedge Fund Performance Persistence.

Something I’ve always preached – when evaluating an investment, forget about raw returns, risk-adjusted returns are what matter.

Today’s best active investments in terms of raw returns – be they hedge funds, managed accounts, or market timers – are rarely able to repeat their performance. Anyone can get lucky and throw a lot of leverage at the right asset at the right time; raw returns will capture that.

But it takes repeated good choices and sound money management to excel at risk-adjusted performance.

Shameless plug: these guys have consistently been ranked as one of the best market timers for risk-adjusted performance.