According to regulations, all mutual funds (MFs) must have a benchmark against which performance is measured. But not all fund portfolios carry a likeness to their benchmarks.
WHAT IS BENCHMARK?
A benchmark for products such as MFs is usually a well-established index of securities. For instance, large-cap schemes usually use the S&P BSE Sensex and Nifty 50 as benchmarks. If a fund cannot consistently outperform its benchmark, an investor won’t have an incentive to remain invested. It is mandatory for fund houses to show scheme performance against the benchmark while marketing a scheme.
