The pitfalls of investing, based on a benchmark

Most people would like to believe that professional fund managers make every investment decision based purely on the merits of each investment, but sadly this is not the case. The majority of mainstream fund managers run benchmark aware portfolios. But this is not done to produce a superior investment return. Rather it is done to manage a specific risk, namely that returns being generated do not vary too far from the overall equity market. With the returns of the benchmark itself dominated by a relatively small number of mega capitalisation stocks, this creates another distortion that is not designed to maximise investors returns. Benchmark investing has a lot to answer for. At Monash Investors, we believe that being benchmark-unaware allows us to focus purely on producing better investment returns, by only owning compelling stocks that may offer higher returns and not owning stocks simply because of their weight in the Index. (VIEW LINK)


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In 2012, Monash Investors was established by one of Australia’s most experienced fund managers in Simon Shields, the previous head of equities at both UBS and CFS, and Shane Fitzgerald a senior equity analyst from UBS and JPMorgan. The firm was...

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