With nearly a decade of growth since the 2008 financial crisis, benchmarking has been subject to reduced scrutiny. It is arguable that in largely rising markets people are less concerned when a fund strays from its benchmark, as long as it is producing a high level of return relative to more challenging conditions.
However, the stimulus applied by central banks to sustain economies after the last major crash, which resulted in an extended bull market for equities and bonds, is now starting to wane. As global reflation continues to take hold and interest rates increase, the underlying fuel for markets is diminishing and some economists are warning of lower growth in future.
This whitepaper introduces a new value-based benchmark concept and provides detailed insight into Thomsons UK Pensions Technical team's methodology and testing.