Benchmark

A benchmark is the reference value against which an investment's performance is compared.

Typical benchmarks:

• Global equities: MSCI World, MSCI ACWI
• US equities: S&P 500
• German equities: DAX
• European equities: STOXX Europe 600
• Bonds: Bloomberg Global Aggregate Bond Index
• Emerging markets: MSCI Emerging Markets

Why benchmarks matter:

• Without a benchmark you don't know whether your fund manager is doing a good or bad job
• A +5% return sounds good – but if the market made +12%, it's bad
• −3% sounds bad – but if the market made −15%, it's excellent

The question EVERY active fund manager has to answer:

"Did you beat your benchmark – AFTER deducting your fees?" In over 90% of cases, the long-term answer is: no.