Benchmarks for Multi Asset Portfolios?

Just a little curious on types of benchmarks that asset managers use for multi-asset portfolios/funds. Not looking for one in particular, but a direction for me to look in would be great.

Hedge Fund Interview Course

  • 814 questions across 165 hedge funds. Crowdsourced from over 500,000 members.
  • 11 Detailed Sample Pitches and 10+ hours of video.
  • Trusted by over 1,000 aspiring hedge fund professionals just like you.

Comments (20)

Oct 29, 2017

WolfyWolfyWolfy, sorry there are no responses yet. Maybe one of these topics can point you in the right direction:

  • Is Multi-Family Asset Management a related field? multifamily asset management ... Pardon my ignorance, but I'm looking for internships and I see quite a few for this field. It ... doesn't directly seem to involve finance that much, and for one of the positions I'm applying for, it ...
  • Blackstone Multi Asset Investing VS IBD MM/BB 2017 SA I heard BX 's Multi Asset Investing team is essentially AM, but I could be wrong For MM / BB think ... I think the title speaks for itself. What would have better exit opportunities and lifestyle? ...
  • blackRock Multi-Asset Portfolio Strategies Hey guys, I have an interview with BlackRock for Multi-Asset Portfolio Strategies analyst ... Group. What can I expect from the interview? is it same as JP Morgan Asset Management- Global Multi Asst ... Strategies? or general asset management? BlackRock Strategies ...
  • JPM global multi asset group internship Investment Management Solutions Group (IMS) Global Multi Asset Group (GMAG) you could join our Client ... you could join IMS GMAG's Portfolio Management group who are responsible for investing individual ... experience would be for somebody looking to pursue a career in AM? The site states 'Within o
  • Asset Management vs Investment Banking 101 consideration for asset management jobs out of undergrad. Despite investment banking positions receiving all the ... Asset Management vs Investment Banking- What are They? Before examining whether you'd like to ... work at an asset manager or investment bank, it's important to first understand what exactly they ...
  • 1 Year out of Undergrad- Asset Management or IB first? How to break into Asset Management? plz help! working as a business analyst (non-finance) for a large FI. I am interested in investing and AM, but ... all Investment Banking asset management ... a job in Equity Research, then apply for AM. 3. Stay at current FI, try to move internally. Thank you ...
  • Portfolio tracking software / website for multi-asset non-US personal investments change (e.g. put a certain monthly amount into cash investment for a few months, and sell so and so ... for stocks on exchanges other than the NYSE/Nasdaq. Additionally, my portfolio will include cash ... investments, stock, stock options (from my job), private sector (angel investing), government and company bonds ...
  • More suggestions...

Maybe one of our professional members will share their wisdom: @neil91 @Ngo Van-Hung @goblan

I hope those threads give you a bit more insight.

Oct 31, 2017

Well, it would obviously depend on how you define multi-asset. Is it PE & RE? RE & Infra? PE & Private Debt? PE, RE & hedge funds? Generally speaking, if its private market assets, asset managers just go to Preqin or Pitchbook and create a custom benchmark with the characteristics they want. If you define multi-asset as more than two distinct asset classes, it is more common to use an absolute (eg: 8% compounded annually) or relative (eg: CPI + 5%) benchmark as opposed to a peer based benchmark.

    • 1
Oct 31, 2017

The real money benchmarks are normally the common big indices, e.g. Spooz for equities, Barclays (used to be Lehman) Agg for bonds, etc.

HFs don't really use benchmarks per se and are more absolute return. However, I suppose the more appropriate term to use is sorta kinda "hurdle rates". The most common ones are (or at least used to be) based on LIBOR.

My Z$2c...

Oct 31, 2017

Mutual funds use different benchmarks based on the type of strategy, so e.g.

Large-cap US equities mutual fund ---> S&P500
Large-cap US growth equities fund ---> russell 1000 growth
Global long-only fund ---> MSCI world
Global tech fund ---> MSCI global tech

HFs are usually judged on absolute performance, but some allocators look at the Barclays Hedge Fund index as a benchmark, which I believe is just a collection of various HFs' performance numbers. I don't think that benchmark can be updated on a daily basis and maybe more of a monthly performance number, but someone in the HF industry would know better.

Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Oct 31, 2017

There's a whole lot of reading in CFA Lvl III on this you could have a look at.

The theory is that you want to make sure the benchmark reflects the style of the investor as well as the asset class as such. So you can get quite fancy with custom-built benchmarks, with weights the result of regressions and so on.

Maybe it's as much art as science, but the risk is always that if you're a small cap biotech firm focusing on East Asia, and you use the MSCI Global, then your alpha against that index would actually not reflect manager skill at all, but simply a different set of factor exposures. You'd get paid for the kind of manager you are rather than for being particularly good at what you do.

Sometimes you can get lucky and find an index that's appropriate, but a lot of the time it is probably better to generate a custom benchmark.

And yeah, hedge funds are more about absolute returns and are at any rate so heterogeneous and liable to changing factor exposures frequently that it'd be hard to set an appropriate benchmark you can compare them to over time. CFAI at least is wary of HF indices as well, because there are issues with biases induced by who enters and exits the index over time.

Oct 31, 2017

There's a whole lot of reading in CFA Lvl III on this you could have a look at. >

Don't, it's a cruel and unusual sort of punishment which i'm currently enduring.

Oct 31, 2017

Thanks for this. Also I believe an issue with the HF indices is that only those funds who choose to report are included, so needless to say it will be one sided.

Don't listen to anyone, everybody is scared.

Oct 31, 2017

With asset allocation, it's hard because you have mixtures of exposures, active/passive, perhaps some illiquids. In my experience, at that point bmarking becomes a challenge because the only true benchmark is the client's goal itself.

All that being said, IME, a positive alpha and high sharpe are validation of a sound strategy. But again, what use is that to a client who has an income threshold that needs to be met? Or willingness to take on liquidity risk in private placements, etc?

Oct 31, 2017

Very good points. Is it a fair assumption to assume all HF strategies can be generalized as high/speculative risk in nature and growth oriented? Obviously different strategies are implemented based on the fund type but are there any with a relatively "conservative" approach or income orientations?

Don't listen to anyone, everybody is scared.

Oct 31, 2017

Why not do a weighted average for each asset category?

If you're portfolio is 50% equities, 20% fixed income, 20% alternatives and 10% commodities, you just do 50% x equity index + 20% x fixed income index + 20% alternative investments index + 10% x commodity index

Oct 31, 2017

At a H-Fund start-up? I really don't understand the context you are placing these roles within. You need to elaborate and be more clear.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time

Oct 31, 2017

The fund manager.