Which fund suits which type of investor?
UNLU Porfolio Fixed Income Funds
Suitable for conservative investors who traditionally invest in time deposits. The funds aim to surpass yields on time deposits while displaying limited additional volatility.
UNLU Portfolio Hedge Fund
Suitable for investors who aim for higher returns and are willing to tolerate some volatility. Investors in this fund must meet the CMB’s “qualified investor” criterion.
UNLU Portfolio Capital Protected Funds
Suitable for investors who are aiming to protect their principal investment while benefitting from a directional position in the BIST 30 index.
What to look for when comparing fund performance?
Undoubtedly, return is the quickest way to gauge a fund’s performance. However, headline returns can be misleading and insufficient in fully assessing fund performance. For example high returns obtained through high volatility may not be sustainable. Therefore, investors must look at additional metrics in judging performance.
Volatility is a statistical measure of the dispersion of returns for a given financial instrument. Volatility is a useful proxy when assessing risk. The historical average volatility for the BIST 30 index is around 23%. The VIX index ( a measure of volatility in the S&P 500 index) has an historical average of approximately 17%. In comparison, UNLU Portfolio Fixed Income Fund has a volatility of below 1%, and UNLU Portfolio Hedge Fund slightly above 3%.
Risk Adjusted Return
A Fund’s performance should be evaluated by looking at the risk adjusted return. A widely used measure of risk adjusted return is the Sharpe ratio. This is the ratio of the fund’s excess return (over the risk free rate) to the standard deviation (i.e volatility) of the fund returns.
The Sharpe ratio is inversely proportional to the fund’s standard deviation and directly proportional to the fund’s return. Therefore, a fund with a higher Sharpe ratio provides a better risk adjusted performance, even though its absolute return may not be the highest.