Study Analyzes Mutual Fund Benchmarks and Performance
A study published in July analyzes changes to mutual funds’ declared benchmarks and how performance metrics for those funds changed as a result. The study found that between 2006 to 2018, 36.5% of the funds examined undertook at least one benchmark change. The study notes that funds choosing to switch their benchmark experienced an average 0.8% increase in one-year returns, a 2.4% bump over five years, and 4.8% improvement in the 10-year time frame. The authors’ state to address what they view as “manipulation” by funds, the SEC could “amend the rules on disclosure to require funds to compare their past performance only to the benchmark indexes they cited during the performance period.” The study obtained data from the Center for Research on Security Prices Mutual Fund database and included a main sample of 2,870 unique, diversified U.S. equity funds. The authors excluded data from balanced funds, sector funds, index funds, exchange traded funds, exchange-traded notes, and target-date funds.
Click here to read the authors’ study on mutual fund benchmarks and performance.