Benchmarks
CSSF regulation 2016/2011 established some ground rules regarding the use of benchmarks in the financial sector. ESMA has later issued a rather precise “recommendation” about how to use benchmarks when evaluating a portfolio managers work. The recommendation stipulates that the benchmark somehow have to be relevant to the actual investment activities in a fund. Why has it been necessary to make such clarifications?
This course consists of 2 modules with a total of 8 hours of training.
Module 1 : What is a Benchmark?
A benchmark is usually defined as a standard against which one measures the quality of a process or its outcome. The financial sector has an ambivalent relationship to benchmarks: few can do better than their benchmark, so the tendency is to devalue the benchmarks, making them easier to “beat”. We look at the history of benchmarks.
Module 2 : Benchmarks and performance fees
As the margins are being squeezed everywhere in the financial sector, investment managers would like to receive part of their payment in direct relationship to their performance. A benchmark is used for this calculation. But the EU and ESMA have had to step in to make sure that the selection of benchmarks makes sense.
Kim Olsen
Instructor
Kim is a veteran of the Luxembourg financial sector. He has worked along the entire value chain of asset management and has gained a deep insight of how regulation influences the end-product.