Sebi's information ratio proposal: Clear insight or investor overload?
Published by Mint
Abhishek Kumar's role: Quoted
Abhishek Kumar welcomed the proposal, saying the ratio helps compare how consistently a scheme beats its benchmark on a risk-adjusted basis and can inform the active versus passive debate.
What Abhishek Kumar said
Why did you welcome SEBI's proposal to disclose the information ratio?
I saw it as a welcome step. The information ratio helps you compare how consistent a mutual fund scheme's returns are against other schemes or a benchmark, after adjusting for risk; a higher ratio means steadier returns. It gives a finer picture of how a fund has performed, which helps investors make better-informed decisions and fine-tune their investment strategies.
How could the information ratio help in the active versus passive debate?
In my view, it can help settle that debate. With this ratio you can see how much return over the benchmark a fund manager consistently generates for a given level of risk. It does this by bringing tracking error into the picture, rather than just working out the excess return from the tracking difference. That makes it easier to judge whether active management is really adding value.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on money management
SEBI has proposed that mutual funds disclose risk-adjusted performance using the information ratio, which compares outperformance over a benchmark with its consistency. The article explains the metric, how it differs from the Sharpe ratio, and whether it will help investors or overload them.
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Sebi's information ratio proposal: Clear insight or investor overload?