Sterling Ratio

Sterling Ratio

A ratio of the potential return on a hedge fund to a measure of risk. A higher ratio is considered more desirable because it indicates that the hedge fund has a greater return compared to its riskiness. It is calculated thusly:

Sterling ratio = Compounded annual return / (maximum possible loss - 10%)

See also: Calmar ratio, Sharpe ratio, Sortino ratio.
References in periodicals archive ?
In addition, Fundamentals includes on-demand access to sophisticated metrics that more accurately portray hedge fund performance, such as skew-ness, kurtosis, maximum drawdown, upside variance, Sterling ratio and Calmar ratio.
This section compares the strengths and weaknesses of using average monthly return, standard deviation, Sharpe ratio, Sterling ratio, MAR ratio, compounded annual return and unit value, and percentage/number of months profitable.