Equity market neutral benchmark? Hurdle rate or T-bill?

CFA Level III
#1

Hi everyone,

A bit of confusion here, one of the readings says that the benchmark for an equity market neutral fund should be the 3 month T-bill, another says it is an absolute return strategy = use a hurdle rate.

Can someone please confirm… do you use a hurdle rate other than the 3 month T-bill, or use the T-bill… or am I just confused, and the hurdle rate should be the 3 month T-bill?

Thanks a lot.

#2

You should use a risk-free rate. I guess that the 3-month T-Bill rate’s as good as any.

#3

Thanks S2000!

P71 of the alternative investments book, Q2 says funds using absolute-return strategies indifferent to market direction, hurdle rate may be used… I guess that is in fact the T-bill since there’s no systematic risk – read that in another reading… just the ‘hurdle rate’ is messing me because, as it can be arbitrarily set.