Manager A and Manager B, both large cap growth styles have the same absolute returns of 10%. Manager A and B have Sharpe ratios of .65 and .55 respectively. Manager A and B have information ratios of .4 and .6 respectively. Which manager do you choose and why? They both have the same benchmark as well making active return equal. No other information about the managers is provided and you must make an answer. Distributions are assumed to be normal as well for both managers.
It seems like you would favor the Sharpe ratio guy if you believe market Beta is a good deal, but you would choose the Information ratio guy if you believe the ratio indicates that he produces meaningful Alpha. You’d also choose the Alpha over Beta if you want an asset that is less correlated with market returns.
Speaking to your last comment about wanting less correlation. If i wanted less diversification id take the manager with more active risk/lower info ratio right? And, if I wanted the beta exposure I’d want the less active risk? Lastly, if I thought it was meaningful alpha, then I’d do with the more active risk? Sorry for the follow up…
Googs I have a feeling you sat the FRM Part 1 exam on Saturday…
If so, the question you’re referring to specifically said that the sharpe ratio had to be a minimum of 0.30. Out of the 4 investment opportunities, 2 of them had sharpe ratios over 0.30 but one of them had a much higher IR. I think it was selection B.
Ignore the above if I’m wrong 
Haha no unfortunately I’m only studying for Expert level CIPM