Why benchmark performance

A benchmark is like a plane ticket. The ticketholder (the client) establishes a destination and understands that reaching the destination requires a certain duration. The pilot (the investment manager) is responsible for establishing the flight plan but may be obliged to make adjustments should inclement weather appear. Both the ticketholder and the pilot recognize that turbulence along the way is always possible, but the pilot is not expected to change destination just because of a bumpy ride.

A benchmark defines the investment objective. Using the historic relation between risk and return, the benchmark provides a measurable standard of performance comparison.

Managing your account without a benchmark is like buying a plane ticket without specifying a destination.