Understanding Risk-Adjusted Returns

It's tempting to rank funds by their headline return and stop there. But a return earned by taking on outsized risk isn't the same as one earned through a disciplined process — and it's usually the risk that catches up with investors during the next drawdown.

Why the raw number can mislead

Consider two hypothetical funds over the same five-year period:

• Fund A returns 12% annualized, but with sharp drawdowns of 30%+ along the way.
• Fund B returns 9% annualized, with a maximum drawdown closer to 12%.

On paper, Fund A wins. But an investor who couldn't stomach a 30% drawdown and sold near the bottom would have realized a far worse outcome than the one who stayed invested in Fund B the whole time. The return you can hold onto often matters more than the return that looks best on a chart.

Metrics we look at

• Sharpe ratio — return earned per unit of total volatility.
• Sortino ratio — similar, but only penalizes downside volatility, which better reflects how most investors actually experience risk.
• Maximum drawdown — the largest peak-to-trough decline, a plain-English gut check on "how bad could this get?"

How this shows up in our fund design

Each of our funds is built with an explicit risk budget before we think about return targets. Our Strategic Income Fund is deliberately conservative, while our Global Opportunities Fund accepts materially more volatility in exchange for a higher return target — but in both cases, the risk level is a decision, not an accident.

When you're comparing funds — ours or anyone else's — we'd encourage you to ask about the drawdown history, not just the headline return.