Ghost Stories #110: Putting performance in context - choosing the right benchmark

How do you know whether your investment performance is actually good?

In this episode of Ghost Stories, The Finance Ghost is joined by Siyabulela Nomoyi from Satrix to unpack one of the most important, yet often misunderstood, concepts in investing: benchmarks. From retail portfolios to institutional mandates, they explore why returns only tell half the story and why every investment outcome needs a meaningful point of comparison.

The discussion goes well beyond the basics, covering how benchmarks are selected, the role they play in risk management, the differences between indices and other benchmark types, and why ETFs offer investors an accessible way to measure performance against the market. Siya also shares practical insights into index construction, concentration risk, tracking error and the common mistakes investors make when choosing benchmarks, reminding us that outperforming a benchmark isn't always as impressive as it sounds.

In this episode:

• Why benchmarks are essential for evaluating investment performance
• How investment mandates, time horizons and risk tolerance influence benchmark selection
• The difference between indices, benchmarks and hedge fund hurdle rates
• Why ETFs are a practical way to access investable benchmarks
• How index construction and weighting methodologies affect risk and returns
• The importance of tracking error, fees and liquidity when assessing ETFs
• Why beating a benchmark can sometimes be misleading
• Common mistakes investors make when choosing and using benchmarks

This podcast was first published here

Disclaimer:

Satrix Managers (RF) (Pty) Ltd is a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments. With Unit Trusts, Exchange Traded Funds (ETFs) and Actively Managed ETFs (AMETFs), the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of ETFs and AMETFs, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs and AMETFs are registered as a Collective Investment and can be traded by any stockbroker on the stock exchange, LISP platforms and / or via online trading platforms. ETFs and AMETFs may incur additional costs due to being listed on the JSE. Past performance is not necessarily a guide to future performance, and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions is available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF and AMETF Minimum Disclosure Document. AMETFs are ETFs are actively traded by a Portfolio Manager to adjust the AMETF holdings and asset allocation with the aim to outperform the benchmark. AMETFs differ from ETFs which only track indices. The Manager does not provide any guarantee, either with respect to the capital or the return of a portfolio. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF and AMETF Minimum Disclosure Document and/or on https://satrix.co.za/products.