Does benchmarking help?

In this paper we examine benchmarking as it is used in fund management and especially asset allocation. We explore the concept of benchmarking in fund management, and selection of the appropriate benchmark. Some of the major problems associated with benchmarking are dealt with, including the risks involved and measures taken to deal with the inherent risk, such as risk adjustment. Finally we advocate that trustees need to interact with fund managers more closely if the fund is to develop in the desired direction. This should include an understanding of the organisational aspects of the fund manager's role.