Sortino absolute, return, pretty

yuoska

pretty straight-forward, right? but the CFAI books have me confused:

(Alt Investments, V5 p. 88)

(1) Sortino, hedge funds = (annualized RoR - risk-free rate)/(downside deviation)

(Risk Mgmt, V5, p.268)

(2) Sortino = (mean portfolio return - min. acceptable return)/(downside deviation)

On the exam, I would use (2).

(1) is only for hedge funds? why would the risk-free rate be used? it assumes an absolute return strategy?