How do benchmarks measure up?

Fund benchmarks

Professional Adviser
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Last month, investment research manager at OBSR Gill Hutchison looked at multi-manager funds with a particular focus on relative versus absolute returns and asset allocation. However, with these issues closely allied to the question of benchmarks, it is important to understand in more detail the use of sector average performance as a way of judging a fund's results

Life would be a good deal easier if we were able to compare all funds within the same sector to each other and draw conclusions about their performances simply by referring to the sector averages and quartile rankings. IMA and ABI sectors are certainly good starting points in helping us to organise the fund universe, but widely drawn as they are, they are just that, starting points. Consider the IMA UK All Companies sector - according to Lipper, the sector currently features almost 350 individual funds. Within that universe of funds, we can point to a huge variety of fund mandates and ...

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