A Fund manager ‘s performance can be assessed with the help of certain BENCHMARKS. Benchmarks are nothing but independent portfolios that are not managed by any fund manager. They are purely representative of the behavior in market returns of selected securities. These independent portfolios can be used to measure the performance of a fund manager. Benchmarks

Like if a mutual fund says that it will invest in all the large cap companies in India, then its benchmark would be mostly NIFTY, because NIFTY is the indicator of the large cap companies. In the same way a Small Cap Mutual Fund would have CNX MID CAP. One can just buy that Index and get returns from it based on the movement of the stocks in that benchmark. Benchmarks

Completely independent. No influence of fund manager. Comprise of market securities – representative of risk and return of the underlying market. Benchmark value should be publicly available. Should match the mutual fund portfolio objectives Qualities of an ideal benchmark

For actively managed all equity portfolios – BSE Sensex and S&P CNX Nifty. For broad based equity portfolio – S&P CNX Nifty- it tracks 500 companies. For sectoral funds, sectoral indices are used (eg : If fund portfolio consists of only bank stocks, the appropriate bench mark is bank stocks). For short term funds and money market funds – Treasury bill rates and NSE Mibor. For bond funds - Government bonds are used For combo of equity and debt – combo of equity and debt market index. Benchmarks used in mutual fund industry

Outperformed or underperformed If fund performs > Benchmark = Fund has outperformed If fund performs < Benchmark = Fund has underperformed Benchmarks