How We Measure Performance
Understanding performance starts with understanding what you measure it against.
At MKC Invest, we take a structured approach to benchmarking, using global markets as a clear and consistent reference point for how portfolios perform over time.
Expert wealth management
How We Measure Performance
Understanding performance starts with understanding what you measure it against.
At MKC Invest, we take a structured approach to benchmarking, using global markets as a clear and consistent reference point for how portfolios perform over time.
Expert wealth management
“Designed to reflect global markets, not follow the crowd.”
Benchmarks: how we measure performance
Discretionary model portfolios require benchmarks so that investors and financial planners can see how each portfolio is performing over time.
There are several types of benchmarks commonly used in investment management. These may be based on:
- A sector or “peer group” of other investment managers
- An economic indicator such as interest rates or inflation
- A fixed annual return, for example a target of 5% per year
- A market index representing shares or other assets, such as the FTSE 100 or the S&P 500
The MKC Invest difference
We believe our performance should be judged against the agreed objectives and risk levels of each portfolio.
We also believe it is important to retain the freedom to make investment decisions we consider to be in the best interests of our clients. Measuring performance against benchmarks that reflect the behaviour of other investment managers may limit that flexibility.
For this reason, we chose to create our own benchmarks.
Our aim was to design benchmarks that would:
- Be simple and easy to understand
- Consist of assets that investors can actually invest in
- Avoid being driven by the behaviour of other investment firms
- Be defined by us rather than by a third party
In reviewing different approaches, we observed that simple benchmarks combining global equities and global bonds have historically performed better than many mixed-asset peer groups used within the Investment Association sectors over many time periods.
This led us to consider whether measuring performance directly against global markets may provide a clearer reference point than comparing portfolios to a group of other investment managers.
To reflect this idea, we created a simple structure built around two indices:
- One index tracking global equities
- One index tracking global bonds
We chose indices provided by Morningstar, a research partner we know and trust.
We have created ten benchmarks in total. Each benchmark combines these two indices in different fixed proportions, reflecting varying levels of equity and bond exposure.
These are known as the MKC Invest Baseline Benchmarks.