To benchmark, or not to benchmark?
Aberdeen Asset Management senior investment manager Andrew Preston has dispelled what he calls the myth that benchmarks are a good starting point for investing.
Speaking at the PortfolioConstruction Conference yesterday, Preston said that while benchmarks provided information about past performance, they were unable to tell investors about the prospects or worth of companies.
“Benchmarks don’t tell investors anything about the quality of companies; are they good or bad companies, what is their management like, what is their history?” he said.
Preston also argued that benchmarks do not reflect world productivity and that biggest wasn’t always best.
“Large companies don’t always prove to be the best investment; sometimes medium to small companies do better, but indexing or benchmark investing leads you to the larger companies.”
Preston suggested a better investment strategy would be to focus on high quality companies, adding that perhaps advisers should be looking for fund managers that were benchmark aware and not benchmark driven.
Recommended for you
Rising advice fees has prompted Radar Results to increase its price guide to a minimum of $3,000 per client to reflect the changing shape of the adviser landscape.
Investment consultancy Ascalon Capital has appointed a new partner, who joins from 20 years at Zenith Investment Partners, as well as a new chief executive amid a “bold new chapter” for the firm.
Despite the perception that short-term market events shouldn’t affect portfolio decisions, Praemium research finds 60 per cent of advisers have made portfolio changes in response to US President Donald Trump’s decisions.
International advice group Findex has appointed a senior individual to spearhead its M&A and growth operations across Australia and New Zealand, seeking to make the brand a household name.
