Information ratio

Active return divided by tracking error. It measures skill relative to a benchmark rather than relative to cash.

A manager beating the index by 4.4 points with 6 points of tracking error scores 0.73.

It is the right measure for a benchmark-relative mandate, since it asks how much of the deviation from the index was rewarded.

Sustained values above 0.5 are rare over long periods, which is the empirical statement behind the growth of index funds.