Loading…
A PMS delivered 20%. Sounds good — but good compared to what? If most comparable strategies made 12%, 20% is impressive. If most made 25%, the same 20% looks very different. Quartile ranking gives the number its context.
Look up any PMS strategy and see its quartile for 1, 3 and 5-year returns, Jensen's alpha, information, Sharpe, Sortino and capture ratios, downside capture and maximum drawdown — a Premium feature.
Log inQuartile ranking divides the eligible PMS universe into four groups by relative position: Q1 is the top 25%, Q2 the next 25%, Q3 the next and Q4 the bottom 25%.
Suppose 472 Equity strategies have enough 3-year history. Ranked from highest to lowest 3-year return, a strategy ranked 75th is in Q1; one ranked 300th falls in Q3.
| Rank (of 472) | Quartile |
|---|---|
| 1–118 | Q1 |
| 119–236 | Q2 |
| 237–354 | Q3 |
| 355–472 | Q4 |
An Equity PMS has a 3-year CAGR of 24.5%. Among 472 eligible Equity strategies it ranks 83rd. Its relative position is 83 ÷ 472 × 100 = 17.58% — inside the top 25%, so it is in the first quartile.
Not just “the PMS delivered 24.5%”, but “24.5% CAGR, ranking in the first quartile among eligible Equity PMS strategies.”
A strategy can be Q1 over one and three years and Q2 over five. Every period has its own eligible universe and its own spread of results — and a newer strategy may have a 1-year rank but too little history for a 5-year one. So quartiles are worked out separately for each period, only among strategies that qualify.
| Period | Quartile |
|---|---|
| 1 year | Q1 |
| 3 years | Q1 |
| 5 years | Q2 |
The same idea applies to risk-adjusted measures. For returns a higher number ranks better; for downside capture a lower number means better protection in falls. So each measure is ranked in its own direction.
A strategy that stays in the better quartiles across periods and across risk-adjusted measures says something about consistency, risk management and the quality of its performance — not only its return.
So don't only ask what return a PMS made. Ask where it ranks against its peers — and whether it has stayed in the better quartiles over time and on risk-adjusted measures.
| Parameter | Quartile |
|---|---|
| 1-year return | Q1 |
| 3-year return | Q1 |
| 5-year return | Q1 |
| Jensen's alpha | Q1 |
| Capture ratio | Q1 |
| Maximum drawdown | Q2 |
Quartile rankings are relative analytical measures based on the eligible comparison universe and the chosen parameter and period. They are not investment recommendations or guarantees of future performance. Sharpe, Sortino and Jensen's alpha use the risk-free rate set in our CAPM values.