A model portfolio which is developed to provide a standard for measuring the manager's risk/ return performance, and to reflect the investor's preferred level of risk over a complete market cycle benchmark portfolio will typically include individual sector indices as benchmarks for each asset class held within the portfolio.
represents the debt manager's neutral liability position and represents the minimum cost subject to an acceptable level of risk. The manager may make active decisions to deviate from the neutral position with the intention of adding value to the actual portfolio. The performance of the manager is judged by comparing the total cost of the actual portfolio with the total cost of the benchmark portfolio.
the personalized asset allocation that has been selected as the primary strategy to meet each client's objectives. This portfolio is developed jointly by the client and a team of advisors. Portfolio action will deviate from this "neutral" position when the investment management team deems it appropriate.
A method for measuring a fund manager's risk/return performance against a standard model portfolio which reflects the investor's preferred level of risk/return over a complete market cycle.
Portfolio management is concerned with managing the ongoing cost and risk of the Commonwealth debt portfolio. This requires a focus on changes in interest rates and exchange rates as these variables can have a significant impact on borrowing costs. A benchmark or model portfolio specifies the optimal exposure to foreign currencies and interest rates (as measured by modified duration) to achieve the AOFM's debt management objective. The benchmark plays a role as a target towards which new debt issuance and Commonwealth swap activity has adjusted the composition of the debt portfolio over time.
A portfolio against which the investment performance of a money manager can be compared. A benchmark portfolio is typically an index, such as the Standard and Poor's 500 (the “S&P 500”), the Russell 2000, the Wilshire 5000, etc. A benchmark portfolio is only relevant to another portfolio if its composition reflects the same security selection and risk profile as the portfolio being compared to. For example, a small cap growth portfolio must be compared to a small cap growth index (such as the Russell 2000 growth). A “First World” international stock portfolio must be compared to a “First World” international stock index (such as the EAFE).
A model portfolio that provides a standard to which a portfolio manager can compare their portfolio. This is used in order to gauge the relative performance of the portfolio over a full market cycle.