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Benchmark

A benchmark is the index or index combination appropriate to a fund’s strategy against which its performance is compared. Every mutual fund states a benchmark or threshold value in its prospectus.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • Equity funds use BIST 100 or BIST All, bond funds KYD government bond indices and money market funds KYD repo or deposit indices; mixed funds take a weighted combination of several indices.
  • A fund’s absolute return is meaningless alone; a 30% return is a failure if the index rose 50%.
  • funds sometimes choose benchmarks that are easy to beat; the benchmark’s fit with the strategy should be questioned.

Formula / calculation

Relative return = Fund return − Benchmark return. A positive difference is called alpha and shows the manager’s added value. Yatırımcı.AI fund pages present fund returns alongside the benchmark.

Interpretation

A fund’s absolute return is meaningless alone; a 30% return is a failure if the index rose 50%. Funds that consistently beat their benchmark over the long term (3–5 years) point to genuine management skill.

Pitfalls

funds sometimes choose benchmarks that are easy to beat; the benchmark’s fit with the strategy should be questioned. Benchmark returns carry no fees while fund returns are net of fees, which biases the comparison against the fund. Benchmark changes break historical comparison.

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Frequently asked questions

A benchmark is the index or index combination appropriate to a fund’s strategy against which its performance is compared.

Relative return = Fund return − Benchmark return. A positive difference is called alpha and shows the manager’s added value. Yatırımcı.AI fund pages present fund returns alongside the benchmark.

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