CVAR
Cultivar ETF
stockBATSETF

Very interesting. Thank you. They were running a Monte Carlo–based extreme tail VaR (99.96%) rather than a historical stress or CVAR framework. Modeling a complete deleveraging disaster. This “risk” number must be super high?

I agree. RoC matters because it is often embedded in both PM compensation grid and capital-allocation decisions. However, the denominator is not standardized across platforms. It is an in-house term. Sharpe on the other hand is an industry standard. RoC is primarily an internal metric that allows the CIO office to compare pods on a common basis. Different firms convert risk budgets into capital differently using various combinations of VaR and some other risk metrics. Some anchor on daily VaR, others on weekly VaR and confidence levels also vary (I know a fund using CVAR as well). As a result, the same pod could show a 20% RoC at one platform and 30% at another. The VaR multiples used for example change from one fund to another as well. Regardless of implementation, the objective is the same. Measure how efficiently a pod converts allocated risk into PnL. In practice, no single metric drives decisions. CIOs typically look at a combination of $PnL, Sharpe, internal RoC, drawdowns and risk utilization when determining compensation, sizing and capital allocation.