I was asked whether Sharpe Ratio was a better measure than Cumulative Returns, in the context of hedge funds.
To me, personally, Sharpe Ratio is a more important measure. By definition, it tells us how much reward we are getting for each unit or risk we are taking. A portfolio that returns 10% that is extremely volatile, indicating a bigger standard deviation of daily returns, is not as favorable as a portfolio that returns 8% with low volatility (however this is purely an opinion). Cumulative returns just tell us how much the portfolio has improved over time, there is no context with regard to volatility. If you had to invest in a portfolio and you could only receive one measure of the portfolio, namely Sharpe Ratio or Cumulative returns, which would you choose as the more important metric and why?
I was just wondering the community's thoughts before I respond back to this person.