Funds are financial products that pursue relative returns. The so-called "relative" refers to comparing the performance of the fund with its performance comparison benchmark. In a certain period of time, if a fund's income is better than its performance benchmark, then whether it has achieved absolute income or surpassed its peers, it should be said that the manager's management and operation of the fund is qualified; Otherwise, it is unqualified. To put it bluntly, the performance benchmark can be regarded as the "passing line" of the fund and the minimum goal that the fund should pursue in its management and operation.
Performance benchmark belongs to the information that Public Offering of Fund must disclose. Investors can know the specific content of the performance benchmark of the designated fund in the fund prospectus, fund contract and other legal documents.
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There are two ways to compare fund performance. One is global comparison, which ranks all funds or the same group of funds together. Second, compare the fund with a predetermined benchmark. This predetermined benchmark is the performance comparison benchmark of the Fund.
This comparison method measures the fund performance by defining a suitable benchmark portfolio for the evaluated fund and comparing the difference between the fund return rate and the benchmark portfolio return rate. The benchmark portfolio is an investable and unmanaged portfolio with the same style as the fund. Performance comparison benchmark is an important criterion for investors to evaluate the performance of fund management companies.
Brief introduction of benchmark index
Since 2002, the regulatory authorities have required open-end funds to publish performance benchmarks at the time of issuance, and funds with different risks and returns track different benchmarks, which is conducive to the stability of fund style and investors' reasonable evaluation of fund performance.
With the comparison between performance benchmark and fund net value becoming the content of statutory information disclosure, investors will no longer simply use the simple and unreasonable method of "whether to beat the market" to judge the quality of funds, which will also help fund managers to abide by fund contracts and maintain a stable investment style.
According to the new fund information disclosure rules, in the annual report, semi-annual report and quarterly report of the fund, the fund manager must disclose the comparison between the net growth rate and the benchmark return rate of the same period, and require the fund to disclose the changes in the net value since the fund contract came into effect in a graphic way and compare them with the changes in the benchmark performance. In this way, investors can intuitively understand the performance of the fund in the past period of time.
Reference link: Baidu Encyclopedia-Benchmark Index