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Managed Fund Benchmarks

Discussion in 'Managed Funds & Index Funds' started by silentmalek, 2nd Sep, 2007.

  1. silentmalek

    silentmalek Member

    2nd Sep, 2007
    Sydney, NSW
    Hi Guys & Guys,

    I just signed up here after loitering for a number of weeks. I have some money in some managed funds, and was wondering how to tell what the performance benchmark is?

    For example, one of the funds - BT Future Goals Fund -it doesn't say anywhere what the benchmark is? Is this likely to be an index, or a weighted mixture of indices?

    ...or is it not that simple? :)


  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    It's not always that simple - especially for a blended fund which invests in a variety of market segments or industries or even asset types.

    Often a fund will publish what their benchmark is - but not always.

    Some funds are clear-cut (eg they can be compared directly to an index), but others funds might have nothing meaningful to compare against.

    That being said, you can always choose your own benchmark - it is rather arbitrary after all.

    Perhaps something like the "risk free" cash rate plus X% (meaning that if you can't beat those returns, you may as well have just put your money in a high interest savings account). Of course, you may want to aim a bit higher.

    PS. welcome to the forums!
  3. jenpalex

    jenpalex Active Member

    16th Aug, 2005
    Another couple of suggested benchmarks:-

    1.The current advertised rate of interest charged on margin loans. If your investment can't beat this in the medium term- say 12 months- you are really going backwards.

    2. the rate of return on an index fund such as the Vanguard Australian Shares fund or the Streettracks ASX200 Exchange Traded fund. These are more like an aspirational target. Most managed fund investors don't beat these over the medium term (now defined as 3-5 yrs ). In fact I will offer you odds of 2 to 1 against you doing so over 5 years. If you want to find out why you shouldn't take me up on this bet look at p267 onwards in the latest (2007) edition of Burton Malkiel's 'A Random Walk Down Wall Street'.

    best of investing luck and I really mean luck,

    Paul Mason