People underestimate the depth & length of “normal” drawdowns

Philip Seager | Capital Fund Management | 22 August 2018 | 0.50 CE

Due to inherent biases in investing, the Sharpe ratios of investor portfolios are often not as high as investors expect. In reality, a realistic Sharpe ratio for any one strategy or manager is in the range of 0.3 to 0.5 as evidenced by equity and bond markets, for example. But just how low can a random walk of a given Sharpe ratio wander through the natural realisation of risk? The depths an...