Benchmarking

Benchmarking allows for objective comparison to be made between two or more  prices (or indices)  to determine whether the unit trust fund had achieved a higher (or lower) value over the same period of time compared to the other unit trusts (or indices).  It is equally  important the right benchmaking is selected to reflect the true performance of the unit trust fund. Generally, for equities portfolio in Malaysia, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) is most commonly used.

A higher returns of the unit trust price would indicate that the Fund Managers had done a good job in evaluating and investing in the riight companies which has grown the value  as compared to that of the market in general or another unit trust of the same category (eg: equity funds).    For instance, should the FBM KLCI registers a negative return of 5% while the equities portfolio registers a negative return of 3%, the portfolio is said to have outperformed the FBM KLCI by 2 percentage points. On the other hand, if the FBM KLCI gained 10% during a defined period while the portfolio registered a gain of 5%, the portfolio is said to have underperformed the benchmark.

There may be instances where unit trusts that appear to perform relatively poor against the relevant benchmark, but actually outperform their peers in the same category (eg: equity trust).