Custom Benchmarks
PortfolioAnalyst provides a large number of standard industry benchmarks for you to choose in a Snapshot or Detailed custom report against which your portfolio's performance can be compared. However, there may be situations when a standard benchmark does not provide an adequate basis for comparison. In these situations, you can create and use your own custom benchmarks.
What is a Custom Benchmark?
Custom benchmarks allow you to combine existing benchmarks already available in PortfolioAnalyst, the combined weight of which must equal 100%. When you select benchmarks for a specific benchmark comparison report, you can choose up to three existing benchmarks including any of your own custom benchmarks.
The return formula for a custom benchmark is calculated as:
Σ(Benchmark Weight X Benchmark Return)
Here is an example of a custom benchmark. In this example, a custom benchmark has been created by combining three existing standard benchmarks:
| Index | Weight | Return |
|---|---|---|
| Russell 2000 | 40% | 20.00% |
| S&P 500 | 40% | 10.00% |
| S&P US High Yield Corporate Bond | 20% | 6.00% |
Based on the weights and returns of each component benchmark, the return for this custom benchmark is 13.20%, calculated as:
(.40 x .20) + (.40 x .10) + (.20 x .06) = 13.20%
Observe the following guidelines when creating custom benchmarks:
- You cannot use an existing custom benchmark as part of a new custom benchmark. Only the standard benchmarks can be used when creating a custom benchmark.
- You must include at least two standard benchmarks when creating a custom benchmark.
- You can add any number of standard benchmarks to a custom benchmarks, as long as the total weight equals 100%.
- Each standard benchmark included in a custom benchmark must have a weight between 0 and 100. No standard benchmark in a custom benchmark can have a weight of either 0 or 100.
- You can add multiple standard benchmarks at a time to a custom benchmark.