Benchmark portfolio vs normal portfolio . Simple explanation ?
I think of this as the investors benchmark versus the portfolio managers benchmark.
u are a small cap portfolio manager who generates a total return of 20% the investor who’s fund you are managing measures you against the market index (benchmark portfolio) which generates a total return of 15% the small-cap index (the normal portfolio u should actually be measured against) generates a return of 18% total active return is: ur portfolio - market index/benchmark index or 20%-15% true active return is: ur portfolio - smallcap index/normal portfolio or 20% - 18% misfit return is: normal portfolio return - benchmark index or 18% - 15%