A US mutual fund benchmark has changed from S&P500 to S&P100. I notice that the returns for S&P500 are MUCH lower than S&P500. Does this mean I can expect my future returns to be lower should this divergent trend continues? Do you see it as a poorly performing fund which always underperformaed relative to S&P500 can now try and meet the benchmark since using the lower returns of the S&P100. I am pretty sure the reason for this divergence is the fact that S&P500 includes smaller names which have most recently outperformed the larger names ( which the mutual fund mainly invests in, hence the main reasons given for the switch of benchmark) but what are your thoughts on this ?
IH8FSA Wrote: ------------------------------------------------------- > I am pretty sure the reason for this divergence is > the fact that S&P500 includes smaller names which > have most recently outperformed the larger names ( > which the mutual fund mainly invests in, hence the > main reasons given for the switch of benchmark) I think you answered your own question here. The manager should be using the benchmark which most accurately represents it’s investment style. If the manager is only focusing on the largest 100 stocks in the US equity market (probably the most efficiently priced of any equity securities worldwide), then it makes sense to use the S&P 100 as a benchmark.
But if the investment style of my fund " US Growth" fund didnt change, why would they change the benchmark? I thought it would be to compare it to a lower benchmark return (the S&P100) this way they can see they “matched” the benchmark vs. using the higher returning S&P500 ( the old benchmark) when using that one they were underperforming the benchmark,
Surely there must be some disclosure (prospectus, etc.) giving their version of why they changed the benchmark. You will have to draw your own conclusions though. I’d look at it with a pretty cynical eye as you’re suggesting and in fact my presumption would be (without knowing more than the information you’ve provided) to stay away from it.
I think it is time to fire that MF manager.