Trustnet Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Our nominated representative for the purpose of this Act is Kirsty Witter.


We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.


In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.


We store and use information you provide as follows:

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.


We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.


The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.


Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.


Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.


If you want more information or have any questions or comments relating to our privacy policy please email [email protected] in the first instance.

Keyword Search

 Calculator Calculator
Time Zone Time Zone
You are here:  FE Trustnet     Education        Ratios


Treynor Ratio

This is another risk-adjusted performance measure, similar in calculation and application to the Sharpe Ratio. The difference is that while Sharpe weighs a fund's returns against total risk (standard deviation, or volatility), Treynor looks at excess return for each unit of systemic risk (the volatility, inherent in the market, that cannot be diversified). The Treynor calculation, then, takes the fund's excess return over a notional risk-free rate (what would be earned from, say, cash on deposit, or Government bonds), then divides it by the fund's Beta. A Treynor Ratio greater than 1 shows that the fund has produced more units of return than of risk. So, in basing on market risk alone, the ratio assumes that non-systemic risk is capable of being eliminated by diversification across a wide range of investments, and measures whether the systemic risk has been rewarded.
Also known as the Volatility to Reward ratio, Treynor is useful in comparing funds that invest in similar market sectors and achieve similar returns. For example, when assessing a range of UK Equity funds, it is the one with the highest Treynor Ratio that is taking on the least market risk to achieve its level of performance. Also, since it factors out the manager's ability from movements in the fund's sector, Treynor may be used to compare fund performances adjusted for systemic risks in different market sectors - because, although intuitively the ratio should be higher for bond funds than for those investing entirely in equities, this is not necessarily true in every case. While not perfect, and not to be taken in isolation, the Treynor Ratio can be a pointer to the optimum risk- and sector-adjusted fund for a particular risk-aversion profile.

Worked Example: Treynor Ratio
Treynor works on the assumption that non-systemic risk – that which is associated with the manager's activities, rather than endemic to the market itself – can be mitigated or eliminated by a combination of investment skill and diversification.
Systemic risk – conditions and movements in the market – cannot be affected by the manager's decisions, and so Treynor measures how much loss or gain has been taken for each unit of this 'unavoidable' risk that attaches to the fund.
In our examples below we look at some funds with good R-Squared correlations to their benchmark, and with differing degrees of sensitivity to its movements (Beta), over a three-year period.

Table 1. Total Return - Ratios table against benchmark "UT Cautious Managed" (risk free rate at 3.5%) from Unit Trust/OEIC universe
Name Alpha Beta R-Squared Treynor
Capita Financial - Miton Extra Income -3.9 1.36 0.89 -1.68
Jupiter - Distribution TR 2.31 0.73 0.86 2.48
Midas Balanced Income TR 2.7 1.30 0.87 3.39
MLC Trust Mgt - Conservative TR 0.06 0.70 0.87 -0.90
UT Cautious Managed TR 0 1 1 0.50

The Higher Betas
Both Capita and Midas have higher Betas – for every 1 point of change in the benchmark, these funds moved 1.36 and 1.30 points respectively. These suggest that both managers are making bets away from the benchmark's composition, and investors will want to see good positive Alphas, indicating that active management is being rewarded.
Capita's negative result fails this particular test, while Midas has generated positive Alpha. However, the point is that both funds are taking on much the same degree of market risk, and the results as measured by Treynor are very different. Capita does not do well from its heightened sensitivity to market movements, and in fact is losing almost 2.2 points more than the benchmark risk would demand. This is reflected in a Treynor nearly 40% lower than that of the Midas offering, which is making 3.39% for every unit of systemic risk.

The Lower Betas
Another contrasting picture is presented by the Treynors of the Jupiter and MLC funds. Their lower Betas are comparable to each other, indicating that the funds have taken on only 70-73% of the movements in the benchmark. Jupiter has turned this to advantage, with a Treynor showing that they generated 2.48% for each unit of market risk. MLC is working with virtually the same degree of systemic risk, but returning a negative Treynor 1.6% below what the benchmark would have offered. To see how this translates into performance, we can examine the next table, which charts the funds' total returns over the same three-year period.

Table 2. Total return performance from Unit Trust/OEIC universe
Name 3y
Capita Financial Miton Extra Income TR 3.1
Jupiter Distribution TR 17.56
Midas Balanced Income TR 25.39
MLC Trust Management Conservative TR 9.39
Sector: UT Cautious Managed TR 11.93

Much as expected, the Jupiter and Midas funds comfortably outperform both the benchmark and their peers, despite the funds' very different Beta relationship to movements in the sector. Where we do see comparable profiles – Capita and Midas, Jupiter and MLC – the negative Treynors point up the funds that are operating in similar conditions to their rivals, but being punished by the systemic risk.
Previous Section «
Next Section »

Back to top of pagetop