Why are benchmarks important?
This video explains what benchmarks are and highlights why they are important to portfolio managers and investors alike.
- Benchmarks are important because they serve as a standard against which the performance of an investment can be measured
- In the equity market, well-recognised benchmarks include the FTSE 100 and S&P 500, while within fixed income it’s the Bloomberg Barclays Global Aggregate Bond Index.
- By reviewing the performance of an investment relative to its benchmark, an investor can gain valuable insight into how the portfolio manager’s asset allocation has contributed to out/underperformance.
The allocation of a portfolio according to an asset class, sector, geographical region, or type of security.