AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
- Represents a personalized benchmark for portfolio performance assessment.
- Includes only securities the manager typically considers for investment.
- Reflects the manager's usual asset allocation strategy and weightings.
A normal portfolio serves as a tailored benchmark uniquely designed to mirror the investment universe and strategy typically employed by a specific portfolio manager. Rather than relying on broad market indices that may not align with a manager’s style or asset class preferences, a normal portfolio comprises only those securities that the manager would normally evaluate or select for inclusion. This makes it a much more accurate and relevant standard for measuring performance.
In essence, this portfolio acts as a reference point that is directly tied to the manager’s approach. Each security within it is weighted based on how the manager would typically assign allocations in real-world scenarios. For example, if a manager consistently emphasizes large-cap technology stocks and underweights bonds, the normal portfolio would reflect that bias in its composition and weightings.
By comparing actual portfolio returns against the normal portfolio, analysts, investors, and the manager themselves can objectively evaluate skill, decision-making effectiveness, and value addition over time. The deviation of the actual portfolio from this benchmark also highlights the manager’s active bets and strategic shifts.
Conclusion
A normal portfolio provides a customized and fair benchmark that accounts for a manager’s usual investment choices and strategies. It enables a more meaningful evaluation of performance than generic indices, ensuring that assessments are closely aligned with real investment behavior.
