To ensure the investment desk generates value relative to the risks taken, the risk department evaluates performance using standardized Risk-Adjusted Performance Metrics.
Key Sovereign Performance Descriptors
  • The Sharpe Ratio: Measures the portfolio’s excess return per unit of total risk, utilizing standard deviation as the risk baseline.
  • The Sortino Ratio: Modifies the Sharpe model by focusing strictly on down-side volatility, ensuring portfolio managers are not penalized for positive upside returns.
  • The Information Ratio: Quantifies the investment desk’s capacity to generate excess returns relative to the benchmark portfolio per unit of tracking error risk taken.

 
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