Author: Cesar J. Gonzales, Jr. CMFC®
Director, Manager Development and Client Portfolio Manager | Xponance
Assuming that ALL value or growth managers are the same could lead to over or underestimating a manager’s true skill. For example, not all value managers construct their portfolios in the same manner. Some value managers look for a deep discount on the stock’s intrinsic value, while others look for valuation gaps relative to a company’s peer group. Within those approaches, there are additional nuances that managers employ. Therefore, if we use a broad-based benchmark such as the Russell 1000 Value Index to measure both managers against, depending on the measuring period ending date, the analysis could lead to an inaccurate assessment of true manager skill.
Using factor-replicated benchmarks or clones, as employed by Aapryl, offers a more accurate and insightful method for evaluating investment performance compared to standard benchmarks. This approach addresses key limitations of traditional benchmarks by tailoring the evaluation framework to the specific characteristics of a portfolio or manager’s style.
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