Glossary· Benchmark-relative
What is Information ratio?
Return above the benchmark, per unit of tracking error.
Consistency of outperformance rather than its size. A fund beating its index by 2% every year scores far better than one beating it by 6% then trailing by 4%.
For the formula and the constants behind this figure, see Methodology.
Guides that use Information ratio
3 guides put this term to work.
- Treynor and information ratio: advanced tools for comparing fundsOne prices market risk, the other prices the decision to differ from the index. For choosing between active funds in one category, the information ratio is the most relevant number on the page.
- Anatomy of a legendary fund run — and why it endedThe five phases every great run follows, why most investors arrive at phase four, and how to separate skill from a style tailwind using numbers rather than the story.
- AI and algorithms in fund management: hype and realityInside Indian AMCs it does operations and compliance, not stock picking. Why predictive advantage is structurally hard, and what SEBI now requires.
More on benchmark-relative
How the fund behaved against its index. All computed from 36 monthly returns, so a fund needs about three years of history to show any of them.
- Alpha
- Annualized return above what the fund's market exposure alone would predict.
- Beta
- How hard the fund moves when the index moves. 1 = in step.
- R²
- How much of the fund's movement the benchmark explains, 0–100%.
- Treynor ratio
- Excess return per unit of beta rather than per unit of total volatility.
- Tracking error
- How far the fund's returns typically stray from the benchmark's, annualized.
- Upside capture
- The share of the index's gains the fund captured in months the index rose. 100 = matched it.
- Downside capture
- The share of the index's losses the fund took in months the index fell. Lower is better.