A Fund manager ‘s performance can be assessed with the he - PowerPoint Presentation

Slide1

A Fund manager ‘s performance can be assessed with the help of certain BENCHMARKS.Benchmarks are nothing but independent portfolios that are not managed by any fund manager.They are purely representative of the behavior in market returns of selected securities.These independent portfolios can be used to measure the performance of a fund manager.

Benchmarks Slide2

Like if a mutual fund says that it will invest in all the large cap companies in India, then its benchmark would be mostly NIFTY, because NIFTY is the indicator of the large cap companies.In the same way a Small Cap Mutual Fund would have CNX MID CAP. One can just buy that Index and get returns from it based on the movement of the stocks in that benchmark. Benchmarks Slide3

Completely independent.No influence of fund manager.Comprise of market securities – representative of risk and return of the underlying market.Benchmark value should be publicly available.Should match the mutual fund portfolio objectivesQualities of an ideal benchmarkSlide4

For actively managed all equity portfolios – BSE Sensex and S&P CNX Nifty.For broad based equity portfolio – S&P CNX Nifty- it tracks 500 companies.For sectoral funds,

sectoral

indices are used (

eg

:

If fund portfolio consists of only bank stocks, the appropriate bench

mark is bank stocks).For short term funds and money market funds – Treasury bill rates and NSE Mibor.For bond funds - Government bonds are usedFor combo of equity and debt – combo of equity and debt market index.

Benchmarks used in mutual fund industrySlide5

Outperformed or underperformedIf fund performs > Benchmark = Fund has outperformedIf fund performs < Benchmark = Fund has underperformed

Benchmarks