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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers

A portfolio manager's PMS strategy is compared with the Nifty 50 TRI to judge how well it did. In performance evaluation, what is this reference index called?

The reference index against which a PMS strategy is compared is called a benchmark. It gives a standard to judge whether the portfolio manager added value over a relevant market index, such as the Nifty 50 TRI, for the same period and risk profile.

  1. ABenchmarkCorrect
  2. BHurdle rate
  3. CRisk-free rate
  4. DStandard deviation

Explanation

A benchmark is a standard, usually a market index, against which a portfolio's returns are compared to judge the manager's skill. A hurdle rate is a return level used for fee computation, not a comparison index. The risk-free rate and standard deviation are inputs to or measures of risk-adjusted performance, not reference indices.

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