Interpretation of Negative IR

CFA Level III Equities
#1

How do we interpret a negative IR of -0.09 ? Can it be expressed in percentage?

#2

Information ratio

#3

A negative IR means that the manager underperformed the benchmark with a -0,09% return for every 1% of additional risk (active risk). The investor could have been better taking a passive aproach investing in the benchmark. Or the additional return earned by the manager over the benchmark return was not enough to cover trading costs (gross of fees IR could be positive , net of fees it’s actually negative)

But a passive approach will not cover trading costs and IR is close to negative 0 => the tracking risk is low .

#4

Thanks a lot Droox

#5

You’re welcome