The benchmark is the benchmark. We sold it, had the client immortalize it in writing (IPS) and put a spotlight on it at every quarterly meeting (performance report). The benchmark is now something to beat (relative, absolute, or adjusted). The benchmarks humble beginnings as a starting point of understanding has passed. It is what it has become. Clients, gatekeepers, and regulators all want added value over a low cost benchmark – if you charge a fee. So focus on beating the benchmark, not the blah, blah, blah.
The differentiating story of we are big, been around a long time, our people, their schools, use of fancy math, and we invest billions for millions is not a different story. Beat the Benchmark (relative, absolute, or adjusted), that’s the story. Remember the 8 P’s from your CIMA class. The reality formulas are: if P > bench, then go to other 7 P’s; if P < bench, then go to other manager; or if P < bench, go to other P’s to find justification to use them anyway. Technology continues to flatten the bell shape curve by lowering costs (fee compression) and disintermediating the middle (M&A = reduced head count), thereby bringing the provider of what a client wants closer together. It’s simple. The majority of all clients’ IPS, benchmark, and performance report for large investment portfolio’s try to beat Global Balanced; many have not, many change the benchmark, and many change the manager. If asset allocation is more important than manager selection is then, it is time that asset allocators be GIPS compliant and have a verified track record just like the manager.
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