Not sure if he said it off-the-cuff and in the buff. But I do remember the quote:

“You only find out who’s swimming naked when the tide goes out!”

The speaker was Warren Buffett of course. He also famously said: “Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.”

He’s a wise old bird is WB and at Tacit Investment Management we’re with him 100%. Yes, we manage returns for our clients but in addition we manage and advise on the risks.



As an experienced discretionary investment manager, it’s still a challenge to describe the possible downsides to a client in a transparent and straightforward way. The answer I find is to take the complex matter and break it down into bite size chunks that illustrate our key concerns.

For example: what is the real potential for a reduction in the value of invested capital over time, coupled with the need to generate a real return over the same period considering inflation after costs over time?

We can discuss intangibles within a tangible context. What’s the real risk of the potential for a ‘smoke and mirrors’ effect and so on? But however, you put it, it can get terribly confusing.

Words like volatility, drawdown, risk to return, Sharpe ratios and other jargon are banded about to offer evidence or a degree of comfort in assessing risks against returns.


Tacit simplifies

At Tacit we provide information that’s similar to others in our peer group. It’s a deliberate strategy to want professional advisers to compare how we manage things in the world of volatility and risk.

But we’ve reached the conclusion that looking at unpredictability and drawdowns is useful. And for a client to understand the more critical numbers, we’ve created a MAR ratio perspective. It’s designed to cut down confusion and to highlight the historic real risk and return management within a portfolio over time

It’s not just about volatility it’s also about looking at outcomes
MAR provides another perspective

Ok the technical bit:

MAR ratio is a measurement of returns adjusted for risk that can be used to compare the performance. The MAR ratio is calculated by dividing the compound annual growth rate (CAGR) of a fund or strategy since inception by its biggest drawdown.

So, greatest return measured by the decline in value. The higher the MAR ratio the more effective the investment strategy.

MAR Ratio: Tacit Steady Growth – 3 Years to 31 July 2018

Tacit Steady Growth 3 Years to 31st July 2018

Source: Tacit Investment Management


Quantitative risk calculations create a guidance environment but it’s not definitive in generating the most appropriate outcomes for underlying clients. Tacit’s approach has always been to focus on the importance of client outcomes.

We believe that we’re getting closer to the point where being able to manage capital at risk becomes more important to our clients as the economic and market cycles rotate. The real potential for capital impairment will become a keener feature as we move through the maelstrom of changes within the debt and equity markets.

We’re here to help, whether we do business with you or not. So, if you’d like us to develop these thoughts in more detail please get in touch via our website or email me directly


This article was created for the DISCUS by Leigh Stephens, Director, Tacit Investment Management. To find out more about Tacit please visit their dedicated page here.