Quote:
Originally Posted by bizaro86
I've never managed other people's money except as a trader for extremely sophisticated clients. But every time I did so we discussed what the benchmark was in advance. I've turned down someone who wanted a low volatility merger arb strategy that wanted to benchmark it to the S&P500, because that's completely unreasonable.
If the manager and a client aren't using the same benchmark that seems 100% likely to result in conflict/disappointment.
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Yeah, and that’s definitely the case. But all the “beat the market” talk is largely ignoring that. I’ve seen largely Canadian mutual funds compare themselves to the TSX when they’re ~40% US stocks and gleefully showing a graph about their outperformance. It cuts both ways, for sure. Improper benchmarks are just like any other chart crime, only more difficult to spot because the reader doesn’t always have the information.