Information Ratio
The Information Ratio is a way to measure how well an investment manager performs compared to a benchmark (like the S&P 500). Think of it as a report card that shows if the manager is doing better than they could by simply following the market. A higher Information Ratio means the manager is consistently making smart investment choices. It's similar to other performance measurements like the Sharpe Ratio or Treynor Ratio, but specifically focuses on a manager's skill in picking investments that do better than the general market.
Examples in Resumes
Achieved an Information Ratio of 1.2 while managing $500M equity portfolio
Improved portfolio's Information Ratio through strategic asset allocation
Developed reporting system to track Information Ratio across multiple investment strategies
Typical job title: "Portfolio Managers"
Also try searching for:
Where to Find Portfolio Managers
Professional Organizations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you explain the relationship between Information Ratio and portfolio strategy to clients?
Expected Answer: A senior manager should be able to explain in simple terms how Information Ratio helps measure their investment decisions' success, using real-world examples and showing how it affects client returns.
Q: How do you use Information Ratio to adjust your investment strategy?
Expected Answer: Should demonstrate practical application of Information Ratio in decision-making, explaining how they balance risk and return, and when they might change their strategy based on this measure.
Mid Level Questions
Q: What factors can influence the Information Ratio of a portfolio?
Expected Answer: Should explain how market conditions, investment choices, and risk management decisions can affect the Information Ratio, using clear examples.
Q: How do you calculate Information Ratio and what does the result tell you?
Expected Answer: Should be able to explain the basic calculation and what different values mean for portfolio performance in simple, practical terms.
Junior Level Questions
Q: What is Information Ratio and why is it important?
Expected Answer: Should provide a basic explanation of Information Ratio as a way to measure investment performance against a benchmark, using simple terms.
Q: How does Information Ratio differ from other performance measurements?
Expected Answer: Should be able to explain basic differences between Information Ratio and other common measures like Sharpe Ratio in straightforward terms.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of performance metrics
- Portfolio analysis fundamentals
- Knowledge of financial markets
- Basic statistical analysis
Mid (2-5 years)
- Performance attribution analysis
- Risk management techniques
- Advanced Excel modeling
- Client reporting expertise
Senior (5+ years)
- Strategic portfolio management
- Advanced risk-adjusted return analysis
- Team leadership
- Investment strategy development
Red Flags to Watch For
- Unable to explain Information Ratio in simple terms
- Lack of practical portfolio management experience
- No understanding of benchmark comparison
- Poor grasp of basic investment concepts
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