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You Can't Eat Risk-Adjusted Returns, but They Still Might Nourish

Investors captured a greater share of the returns of funds that succeeded in balancing risk and reward.

  • Our research finds a relationship between funds' long-term risk-adjusted performance and the extent to which investors capture the returns their fund investments generate. Specifically, we find that higher risk-adjusted performers have narrower "timing gaps," on average, than lower performers, which have wider gaps. In effect, investors are participating in a greater share of the performance of funds that succeed in balancing risk and reward and in a lesser share of the performance of funds that fail to do so.

There's the saying "You can't eat risk-adjusted returns."

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