Not using derivatives could increase your risk

Article Abstract:

The usefulness of derivatives as a protection against rate fluctuations in foreign exchange and interest rates is balanced by the risk involved when amateurish managers or those with gambling instincts use them. These financial instruments should not be used when attendant risks cannot be accurately estimated. When used by responsible managers, they are capable of enhancing liquidity and achieving returns to a degree not normally possible with ordinary stocks and bonds.

Derivatives (Financial instruments)

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Risk-adjusted returns: value managers lead in risk-adjusted performance

Article Abstract:

The Mobius Pure Growth and Pure Value charts report that value managers performed relatively better in risk-adjusted returns in terms of Sharpe Ratios than the pure growth and broad equity managers. Meanwhile, Treynor Ratios for all three categories were compared using a Standard and Poor's 500 index fund as a standard. From this comparison it was inferred that value and broad market managers had been performing well between Dec. 1990 and Dec. 1995

Investment advisers

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Provide better manager universe comparisons

Article Abstract:

The most common methods for calculating risks in investments are beta and standard deviation. Although these methods are effective measures of risk, they are not applicable to calculations measuring risk-adjusted return. To accurately calculate risk-adjusted returns, pension planners can use either the Treynor or Sharpe ratios. A discussion of the key features of each method of calculating risk-adjusted returns is presented.

Portfolio management

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