Our Global Market Strategies
Risk-Adjusted Returns
It is important for investors to look at portfolio returns not only in absolute terms, but on a risk-adjusted basis as well. A good way to measure risk-adjusted returns is to take the annual return and divide it by the maximum drawdown (peak to trough losses). This is called the MAR Ratio. For example, if you have a strategy that generates annual returns of 10% with a 50% drawdown, you take 10 and divide it by 50 which would give you a MAR Ratio of 0.20. A 10% annual return with a 20% drawdown would result in a MAR Ratio of 0.50 which would outperform the first strategy by 2.5 times on a risk-adjusted basis. You would never know this if you only looked at the 10% annual returns that each strategy generated.
MAR Ratio
The higher the MAR Ratio, the better the risk-adjusted returns. For our strategies we seek MAR Ratios between 0.50 and 1, which means that for a 10% annual return we would like to see maximum drawdowns in the 10 to 20% range, not the 40 to 60% drawdowns that most investors have experienced with traditional strategies.
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