Information ratio: how consistently a fund beats its benchmark

The Information ratio (IR) measures how consistently a fund beats its benchmark. Where alpha tells you how much a fund outperformed, the IR tells you how reliably it did so.

The idea

IR = active return ÷ tracking error. "Active return" is how much the fund beat its benchmark; "tracking error" is how much that outperformance jumps around. A manager who beats the benchmark by a steady 3% every year has a higher IR than one who beats it by +10% then −4% — even with a similar average.

How to read it

• Higher is better — consistent, repeatable outperformance.
• An IR above 0.5 is good; above 1 is excellent and rare.
• It's one of the best signals of genuine manager skill (versus luck).

→ Compare funds against their benchmark in the Compare tool.