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Someone told me the volatility of his fund is 4.5%? What does it mean? Is 4.5% the daily average volatility of returns?

The annualized volatility is 4.5%. At an extraordinarily basic level, here are two obvious conclusions:

1) At a 1 sharpe, their fund would be expected to return 4.5% annually. At 2 sharpe, it would be 9% annually, at 3 sharpe, it would be 13.5% annually. 
 

2) The average daily vol of the fund would be 4.5 / sqrt (252) which approximates to about 28bps per day. 
 

 

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