Good benchmarks increase the proficiency of performance evaluation, highlight the contributions of active managers and most importantly, enhance a pension fund's ability to control risk. Bad benchmarks obscure the contributions of fund managers and can lead to the inefficient allocation of a pension fund's assets. Yet, despite the importance of benchmark quality and the advances that have been made in the construction and application of customised benchmarks in the United States, benchmark analysis has remained a neglected issue in South Africa.
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