CFA Level I · CFA Level I Exam · Benchmarking Returns
A fund invests only in small-capitalization value stocks in Europe. Which benchmark type is most appropriate for evaluating its manager?
The European small-cap value style index is most appropriate because it mirrors the fund's geography, size and style. A broad global index or a Treasury bill rate would not reflect the investable universe or risk, so they would produce misleading comparisons.
- AA broad global equity market index
- BA European small-cap value style indexCorrect
- CA 90-day Treasury bill rate
Explanation
A good benchmark reflects the manager's investment universe and style. A European small-cap value index matches the region, size and style. A broad global index and a T-bill rate do not match the mandate.
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