Drawdown is a vital risk metric that quantifies the percentage drop in portfolio value from a high point to a low point before a new high is reached. It’s used by allocators to assess how a strategy behaves during adverse conditions. A strategy with a large or frequent drawdown may suggest poor risk management or overexposure. Comparing drawdowns across managers helps allocators evaluate stress resilience. It’s typically analyzed alongside Sharpe Ratio, Value at Risk (VaR), and Equity Protect (EP) systems, and is critical in strategy review and mandate negotiations.