Ben Gilbert: evaluation

Transcript context

…Back to the year 2000 in this incredible performance. Ben, to what you were saying earlier about uncorrelated returns, not only did they shoot the lights out that year, they’re doing it when the market is down. We got to introduce this concept of a Sharpe ratio now, which for all of you listeners that are in the finance world, you’ll know this, but for everybody else this is a really important concept. I think people grasp it intuitively. We’ve mentioned this concept a couple of times this episode where, okay, great, it’s amazing to have a fund that 25X’s, or a year where you have a 100% investment return, or I bought Bitcoin yesterday and it doubled overnight. Does that make you one of the best investors in the world? We all intuitively know, no it doesn’t, because maybe that was a fluke, maybe you’re taking on an extreme amount of risk, and then the question is always adjusting for the risk that you’re taking. Can you produce a superior return taking the risk into that account? You basically can provide value to investors as a fund manager in two ways. You can outperform the market, or you can be entirely uncorrelated with the market and get market returns. Or what you can do, as RenTech is, both. You can be uncorrelated and massively outperform, which is effectively the holy grail of money management. The Sharpe ratio is a measurement combining these two concepts.…

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