Benchmark-driven investment strategy explained

Benchmark-driven investment strategy is an investment strategy where the target return is usually linked to an index or combination of indices of the sector or any other like S&P 500.^[1]

With the Benchmarks approach the investor chooses an index of the market (benchmark). The goal of the fund manager is to try to beat the index performance-wise.

• The strategic asset allocation is usually delegated to the benchmark chosen^[2]
• The asset managers stay concentrated to tactical asset allocation and fund (security) selection
• No volatility control over time^[3]
• Without volatility constraints over a long period the investor is expected to get higher returns

See also

• Liability-driven investment strategy

Further reading

• Hendry, John, et al. "Responsible ownership, shareholder value and the new shareholder activism." Competition & Change 11.3 (2007): 223-240.
• Ladekarl, Jeppe, and Sara Zervos. "Housekeeping and plumbing: the investability of emerging markets." Emerging Markets Review 5.3 (2004): 267-294.
• Leibowitz, Martin L., Simon Emrich, and Anthony Bova. "Modern Portfolio Management." (2008).

Notes and References

1. Chong, James, and G. Michael Phillips. "Low-(Economic) Volatility Investing."The Journal of Wealth Management 15.3 (2012): 75-85.
2. Leibowitz, Martin L., Simon Emrich, and Anthony Bova. Modern Portfolio Management: Active Long/Short 130/30 Equity Strategies. Vol. 539. John Wiley & Sons, 2009.
3. Blitz, David C., and P. van Vliet. The volatility effect: lower risk without lower return. No. ERS-2007-044-F&A. Erasmus Research Institute of Management (ERIM), 2007.