The biggest problem of using the Sharpe ratio to measure the performance of alternative investments is:

A. It assumes a normally distributed returns but the returns profiles of alternative investments are not even symmetric.
B. It fails to include the correlation effect of alternative investments.
C. It fails to consider the impact of leverage.

Correct Answer: A

The return profiles of alternative investments tend to be asymmetric and skewed. The Sharpe ratio may not be a relevant metric.

B is a true statement but it is not the biggest problem.