New Delhi, June 17 -- The Information ratio is a risk-adjusted performance metric that measures how consistently a fund manager generates excess returns compared to a benchmark. It helps you determine whether a mutual fund's outperformance is due to the fund manager's active selection or simply market movements.

Let's understand the meaning of the Information ratio, how it is calculated and how to interpret it.

Information ratio shows a fund manager's ability to generate returns above a benchmark index relative to the level of active risk taken.

In simple terms, it evaluates whether the excess return earned by a mutual fund justifies the volatility associated with deviating from the benchmark. It is typically useful to analyze the perf...