How to beat the benchmark

EQUITIES

Nick Nefouse, director and investment strategist in BlackRock's Alpha Strategies group, explains why the current economic environment demands a new understanding and approach to equity investing.

The continual, often short term, focus on performance relative to a benchmark is confusing in today’s market. Clients do not ask for “alpha of 3%, with a tracking error of 3%-6% over rolling three-year periods, gross of fees”, because they need something more personal to them. They are seeking to achieve certain life objectives, such as paying a child’s university fees or retiring early, but their investment strategy is still being framed by the pursuit of a benchmark that may not be relevant. Global equity markets have lagged investors’ expectations since the dotcom bubble burst i...