RT Journal Article
SR Electronic
T1 Custom Liability Index: <em>The Proper Benchmark</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 49
OP 56
DO 10.3905/jii.2015.5.4.049
VO 5
IS 4
A1 Ronald J. Ryan
YR 2015
UL https://pm-research.com/content/5/4/49.abstract
AB Most assets are managed versus a generic market index as the objective benchmark. However, the true objective of most investors is to fund some type of liability. Without a custom liability index as the benchmark, assets are usually lost or misaligned versus the proper investment objective, resulting in performance-tracking errors and inappropriate risk–reward behaviors. Quite often, this mismatch of asset risk–reward behavior versus the liability risk–reward behavior results in volatile funded ratios, deep deficits, higher costs, and higher risks to fund the liabilities. Until a custom liability index is installed as the proper benchmark index, investors may be misled as to the true risk–reward objective.TOPICS: Mutual funds/passive investing/indexing, volatility measures