Accountable SAMURAI

Among the following 7 primary types of benchmarks, which one(s) is(are) accountable? - Absolute - Manager universe - broad market indices - style indices - factor-model-based - returns-based - custom security-based I don’t quite understand why the “accountable” should be one of the 7 properties of a valid benchmark – it tells what the managers should do. Appreciate it if you can elaborate on it.

S pecified in advance A bsolute M easurable U nambigous R epresentative of asset classes A ppropriate I nvestable not sure where you are seeing Accountable… you mentioned this yesterday as well on another post…

Your SAMURAI is incorrect little Ninja: S pecified in advance A ppropriate M easurable U nambigous R eflective of the manager’s current investment opinions A CCOUNTABLE I nvestable A benchmark doesn’t need to be ABSOLUTE.

When did Accountable replace Owned? Isnt SAMUROI more apprpriate?

I think the word is Accepted ( lol ).

The benchmark should be accepted ( a.k.a Owned ) by the manager

I never quite understood that. What does it mean for it to be accepted/owned by the manager?

The text states that custom made benchmarks show meet al the benchmark criteria. It is created by and “owned” by the manager

The Manager should bear the responsability of tracking (at least to a certain extent) the bench. This is accountable or owned…

own up to a responsibility of providing a risk adjusted return equal or more to the style benchmark .

If the benchmark for the manager is X , but he denies it ( i.e. does not own the responsibility ), then the benchmark is not appropriate , or the manager is not appropriate to the investor seeking the style.

So, basically, it means that the manager has to actually use that benchmark as a benchmark in measuring performance?

I’m sorry but answering the question “what does it mean to own or be accountable for” with “it means he has to own and be accountable for it” is not a very clarifying…

Accountable means that the PM needs to be able to justify deviations from that benchmark in his portfolio and also be able to explain the benchmark returns.

it makes no sense to have a PM benchmarked to an index which he knows nothing about or can’t explain why his ptf deviates from that benchmark and the returns that made up the benchmark return

this is different than the ‘reflective of current investment opinions’ which states the manager should have knowledge about the securities of the benchmark and its risk factors

Easy to remember.

That the portfolio manager agree that the benchmark is indeed relevant to compare performance against.

Absolutely! Who wants to deal with whiny portfolio managers?