Benchmark-driven investment strategy is an
investment strategy where the target
return
Return may refer to:
In business, economics, and finance
* Return on investment (ROI), the financial gain after an expense.
* Rate of return, the financial term for the profit or loss derived from an investment
* Tax return, a blank document or t ...
is usually linked to an
index
Index (or its plural form indices) may refer to:
Arts, entertainment, and media Fictional entities
* Index (''A Certain Magical Index''), a character in the light novel series ''A Certain Magical Index''
* The Index, an item on a Halo megastru ...
or combination of indices of the
sector
Sector may refer to:
Places
* Sector, West Virginia, U.S.
Geometry
* Circular sector, the portion of a disc enclosed by two radii and a circular arc
* Hyperbolic sector, a region enclosed by two radii and a hyperbolic arc
* Spherical sector, a po ...
or any other like
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of D ...
.
With the Benchmarks approach the investor chooses an index of the market (benchmark). The goal of the fund manager is to try to beat the index performance-wise.
*The strategic asset allocation is usually delegated to the benchmark chosen
*The asset managers stay concentrated to tactical asset allocation and fund (
security
Security is protection from, or resilience against, potential harm (or other unwanted coercive change) caused by others, by restraining the freedom of others to act. Beneficiaries (technically referents) of security may be of persons and social ...
) selection
*No
volatility control over time
[Blitz, David C., and P. van Vliet. The volatility effect: lower risk without lower return. No. ERS-2007-044-F&A. Erasmus Research Institute of Management (ERIM), 2007.]
*Without volatility constraints over a long period the investor is expected to get higher returns
See also
*
Liability-driven investment strategy
Liability-driven investment policies and asset management decisions are those largely determined by the sum of current and future liabilities attached to the investor, be it a household or an institution. As it purports to associate constantly bot ...
References
Further reading
*Hendry, John, et al. "Responsible ownership, shareholder value and the new shareholder activism." Competition & Change 11.3 (2007): 223-240.
*Ladekarl, Jeppe, and Sara Zervos. "Housekeeping and plumbing: the investability of emerging markets." Emerging Markets Review 5.3 (2004): 267-294.
*Leibowitz, Martin L., Simon Emrich, and Anthony Bova. "Modern Portfolio Management." (2008).
Investment management
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