Overview
Benchmarking is a performance measurement best practice, which takes the measured performance of one fund, and compares it the performance of other similar funds.
The performance universe is the group of funds which are selected to compare to the fund in question. This universe is selected generally because they share the same type of assets and strategy as the fund be benchmarked.
Comparison Statistics
Once a comparison universe is chosen, the statistics to be used when running the comparison must be chosen.
- Ranking - ranks the portfolio among its peers.
- CAPM and Potfolio Alpha - utilizes the ideas formulated in the CAPM to measure the risk of portfolio versus a given benchmark as well as it residual return over and above (or below) the risk adjusted return.