Benchmarking Performance Returns

Benchmarking stocks, bonds, mutual funds, and alternative assets is not a topic that is discussed often enough. And I often think about how oversimplified how well or how poorly a fund is performing. For example, pundits on finance TV spend little time sharing with viewers what makes benchmarks unique and important, what assets they represent, or even where to find the data.

Everyone talks about how well [or poorly] the S&P 500, Dow Jones (DJIA), NYSE, or NASDAQ are on points gained. These are very broad market sectors; however, and do they honestly tell us very much about making an actionable investment decision? Probably not. What I want to do in today’s blog post is to present several asset classes and then give you the names of matching or suitable benchmarks which you can then use to compare the performance of product classes.

Cash, the building blocks of money markets, is most commonly benchmarked to the U.S. Treasury 91-day T-bill. Although, the consumer price index is also another measurement to consider. And since money managers release account statements monthly [or quarterly], you can go the Treasury Department website to view the interest yield for the month. If you have the ticker for your money market account, you can also go to, or the Google Finance page, search the product. Benchmarks then automatically appear for that asset.

Fixed-income mutual fund performance can be measured by a Barclays benchmark. Barclays or as of August 2016, Bloomberg Barclays, is unmatched in fixed-income product benchmarking worldwide. That means educational system financed debt, municipal bonds, high-yield bonds, corporate, and short- and long-term sovereign debt products worldwide as well. Barclays measures aggregates as well, which is basically a hybrid of fixed income product markets by region or over a fixed time period. The drawback with Barclays is that you need a paid subscription to access their databases. Barclays  Target date retirement funds for JPMorgan, Wells Fargo, Vanguard and others, are viewable on their retirement fund web pages or through search engine results.

Next is equity. The S&P 500 is commonly used as a benchmark for measuring stock performance against the wider publicly-held equity market or industry sector. There are thousands of marketable domestic equity mutual funds, but that’s just the beginning. MSCI is the global equity market index leader. They provide a suite of free market measurement tools. MSCI The ACWI, for example, is a hybrid of equity returns from developed and emerging markets. “USA”, of course, covers domestic equity products. “World” contains results for large- and mid-cap markets in developed countries globally. Any equity products with global, world or international in the title will likely fall under this category. The MSCI EAFE index covers Europe, Australasia, and the Far East. Therefore, this would be an important benchmark to consider for funds that are invested heavily or entirely in European or East Asian assets. Emerging Markets covers countries with developing economies in South America, Africa, and Asia. Portfolios invested in these regions almost always say “emerging markets” in the title. MSCI Europe covers 15 developed EU countries for large- and mid-cap equities.

Now, on to alternatives with hedge fund index research at There on the HFR index page, you can review some of the strategy-specific performance that I wrote about over the past two weeks. You can even delve into performance charts on hedge fund sub-strategies such as arbitrage, special situations, macro commodity, and even fund of funds (FoF).

If you are an experienced investor, then you are already familiar with benchmarking your returns. Hopefully, you will gain some new data sources through these links that you have not used before… Not a savvy investor and are considering picking out a new financial adviser? Ask them what benchmarks they use to rate fund manager performance. In some cases, secondary benchmarks may be helpful as well. Review how your current investments are being benchmarked with your financial adviser to verify performance measurements, methodology, and if they are familiar with any of the research firms I have listed here. Feel more confident about decisions being made about your assets. I think that knowing the key questions to ask is as valuable as choosing the best funds to suit your investment goals.

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