Properties of a Valid Benchmark: Specified in advance Appropriate Measurable Unambiguous Reflective of current investment opinion Accountable Investable

doubt they’ll even ask it… listing it is the easy part…when they give you some oscure benchmark and you have to decipher why it isn’t suitable is what gets me wound up…

what does reflective of current investment opinion mean?

Is it representative of your portfolio. I think.

the PM knows what’s in the benchmark and he agrees with the investment merit…

that’s what i thought but how is that different from appropriate?

so basically appropirate and accountable combined into one?

A benchmark that rewards mngrs from doing something that nobody else believes in because it’s theoretically incorrect would violate R. Maybe a benchmark that unduly rewards risk taking?

it is appropriate if it fits your style

I think Reflective of Current Investment Opinions means: The manager actually has some opinions about this benchmark and how to beat it. It could be an appropriate benchmark for whatever purpose the fund is serving, but if the manager doesn’t have any opinions (over the long term, there might be no opinions at any specific moment in time), then it’s not appropriate. Actually, from the plan sponsor’s point of view it’s the manager that isn’t appropriate more than the benchmark, but in CFAstan, the benchmark isn’t appropriate for the manager if they can’t generate opinions. However, if it’s a portable alpha strategy, I’m not sure if this is appropriate. The manager will overlay whatever he/she has opinions about onto the benchmark. In this case there wouldn’t be any reflectivity of current investment opinions, but the manager can still add value somewhere else.

This has been bugging me. In the CFAI texts I’m pretty sure it is S.A.M.U.R.O.I. WOULD CFAI BE NIT PICKY ENOUGH TO DEDUCT POINTS FOR PUTTING ACCOUNTABLE INSTEAD OF OWNED? My paraphrase & abbreviations of CFAI text below (Vol. 6, page 22 Reading 43)-- Specified in advance–ex ante…known to all interested Appropriate—consistent with mgr’s style & expertise Measurable–benchmark’s return calculable Unambiguous–secs ids & wgt (or factor exposures) clearly defined Reflective of current investment opinions–manager has current investment knowledge (+,-,neutral) of secs or factor exposures in benchmark. OWNED–investment mgr accepts ACCOUNTABILITY for consituents for performance of benchmark. Intergral to investment process & procedures. Investable–passive mgmt possible. especially full replication.