A measure of the return of a fund relative to the return of a risk-free investment, adjusted for the risk of the fund. Utilized to compare different funds' performance given each fund's unique level of risk. Generally, a higher Sharpe ratio indicates stronger risk-adjusted performance. Calculated by subtracting the annualized return of a risk-free asset (typically proxied by the 3-month U.S. Treasury Bill) from the annualized return of a fund, then dividing the result by the risk of the fund (represented by standard deviation).