Moondog
Term

Benchmark

A reference index used to judge a portfolio's performance and risk.

A benchmark sets the standard a portfolio is measured against. The right benchmark reflects the policy's objectives and constraints, not simply the most familiar market index.

The wrong benchmark quietly distorts behaviour, pushing a portfolio to chase an index unrelated to the family's goals. The right one reflects the policy. For many families the most honest benchmark is their own required return, not a market everyone happens to watch.

Related terms

Diversification Spreading capital across assets that don't move together to reduce risk. Efficient frontier The set of portfolios offering the highest expected return for each level of risk. ESG investing Investing that takes environmental, social and governance factors into account. Expected return The return an asset or portfolio is anticipated to earn, on average, over time. Family governance The structures and agreements by which a family makes decisions about shared wealth. Family office An organisation that manages the wealth and affairs of one or more wealthy families.

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