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The objective of funds or portfolios invested in stocks and/or bonds (called “long only” funds) is commonly expressed as to better perform than some related stock or bond market index. On the one hand, the investor will appreciate the fund will perform better than its benchmark during upward market moves, but he will even better appreciate if the fund behaves satisfactorily during downward market moves, since a portfolio of bought securities is naturally sensitive to market declines. This is particularly the case at the end of a disappointing year such as 2018.
To quantify to what extent a fund or a portfolio is performing better than its benchmark, the market practice is based on the calculation of excess returns, that is, the difference portfolio return –...
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