The metrics that show up in fund decks are mostly the metrics that look good in fund decks. Sharpe ratio. Win rate. Maximum drawdown. They are not wrong, but they are incomplete — and the incompleteness shows up at exactly the moment when an investor most wants to know what they are looking at.
We track three numbers internally. We do not believe a fund can be evaluated without all three. They are not exotic. They are not new. They are just unfashionable.
One: slugging average
Hit-rate is the percent of trades that close in profit. It is the most reported number in trading and the least informative. A 70% hit-rate with average wins of 1% and average losses of 5% is a losing strategy that looks brilliant on paper. A 35% hit-rate with average wins of 12% and average losses of 3% is a winning strategy that gets fired by half its allocators in the first year.
Slugging average — the ratio of average win to average loss, multiplied by hit-rate — tells you whether the strategy makes money. It is the only single-number summary of per-trade economics that survives transparency. We publish it on every quarterly letter, on every closed cohort, on every paper trial. If our slugging average drops below 1.05 for a quarter, the desk meets and we re-evaluate the gates.
Two: patience-adjusted return
The Sharpe ratio assumes the strategy is always in the market. Most strategies in this category are not. We hold cash for weeks at a time. The conventional Sharpe measurement penalises that — cash returns nothing, the volatility of the strategy falls, and the ratio looks suspect.
Patience-adjusted return is the realised return divided by the realised volatility-of-active-time. It tells you what the strategy did with the days it was actually deployed. A fund that earned 8% on 30% of days deployed has a different shape than a fund that earned 8% on 100% of days deployed — and the difference matters when you are sizing into a strategy that promises not to be invested all the time.
Three: maximum patience drawdown
A drawdown number measures how much you have lost from a peak. A patience drawdown measures how long you have gone without a winning trade. They are different.
A fund with a 20% drawdown that occurred over six trading days is recovering. A fund with a 5% drawdown that has been crawling sideways for nine months is dying. The drawdown number does not tell you which one you are looking at. The patience drawdown does. Our internal limit is 90 trading days without a closed winning trade — at that point we stop the engine, audit the layers, and require a re-validated walk-forward before we restart.
Why this matters to allocators
A fund that reports only Sharpe and max drawdown is reporting only the easy half of its book. The hard half — the months of waiting, the trades not taken, the patience drawdowns that look indistinguishable from death — is where the discipline is forged or broken. We would rather show you a worse-looking number on a more informative metric than a better-looking number on a less informative one.
Discipline is what we sell. The numbers we publish should be the numbers that prove we have it.
That is why we report all three.