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Benchmark Return Definition and Quiz

Every active manager should be held accountable for performance and the selection of an appropriate benchmark is a good place to start.
  1. Define - Define Benchmark Return for portfolio performance measurement.
  2. Context - Use Benchmark Return in a sentence.
  3. Quiz - Test yourself.
face pic by Paul Alan Davis, CFA
Updated: February 16, 2021
Call it a market benchmark, investment index, benchmark index or whatever you like. Its returns are fundamental to any investment performance analysis study.

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Benchmark Return for performance measurement


Benchmark Return is the return on the comparison benchmark portfolio of investments for the period of study. It is added to Active Return to determine Total Return. Benchmark Return is slightly different from Market Return and Index Return, although the terms are often used synonymously.

Synonym: index return, market return

To clarify often confusing terms, note the subtle differences below.

In a Sentence

Pat:  If the market was up 4%, and we were up 3%, why is Eve so happy?
Ted:  Our benchmark return was 2%, and that's what's in her bonus plan."


Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.

Videos can also be accessed from our YouTube Channel.

Video Script

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Click box for answer.

With a total portfolio return of 10.24%, an active return of -1.75%, what was the benchmark return? | 8.49% or 11.99%?


Index returns become benchmark returns only when an active manager uses them to compare performance? | True or False?

False, passive managers have benchmarks too.

Questions or Comments?

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