What are fund benchmarks?

In general terms, a benchmark is a standard against which something can be compared. In the investment world, a benchmark gives investors a way of comparing the performance of a fund with a recognised, independent comparator that is aligned with the investment objective of the fund.

Most Artemis’ funds use two benchmarks – an appropriate ‘index’ and their relevant ‘sector’ average.

Benchmarks can be used by funds in different ways:

• Target benchmarks act as a target that the fund aims to outperform
• Comparator benchmarks act as a comparator against which the fund’s performance can be compared
• Point of reference benchmarks provide a reference against which the performance of the fund may be measured. In the case of this type of benchmark, the deviation from the benchmark may be significant and the portfolio of the fund may at times bear little or no resemblance to its benchmark

Artemis funds are “active” funds . The management of active funds tends not to be restricted by their benchmark. For example, a fund manager won’t buy shares in a company just because the company makes up a large proportion of the fund’s benchmark index or because a lot of the fund’s peers own it.

For information on the benchmarks for each fund, and how they are used, see their Key Investor Information Documents (KIIDs).

‘Index’ benchmarks

An index measures the price performance of a basket of securities (securities being investment assets such as shares, bonds, gold and silver). For example, the FTSE 100 stockmarket index comprises the shares of the 100 largest companies (by market size) listed on the London Stock Exchange.

If a fund invests predominantly in the shares of the largest UK companies by market capitalisation*, the FTSE 100 index would be a suitable benchmark against which the fund’s performance could be compared. If an investment in this fund made more money for an investor than the equivalent amount invested in the FTSE 100 over a set time period, the fund could be said to have outperformed its benchmark over this time. If the fund returned less than the FTSE 100, it could be said to have underperformed.

* Market capitalisation (often referred to as ‘market cap’) is the total value of a company’s shares. To calculate market cap, take the total number of shares and multiply by the current share price.

Number of shares x Share price = Market capitalisation

‘Sector’ benchmarks

Sectors are a group of asset managers’ funds that invest in similar asset types, collated by the UK’s Investment Association (IA). These are known as ‘sectors’.

They can also be used as benchmarks against which funds can compare their performance. For example, a fund that invests predominantly in the shares of UK companies of any size could use the IA UK All Companies sector as its benchmark.

Sectors can be distinguished by region (for example the IA Asia Pacific excluding Japan or IA Global sectors), market capitalisation (IA UK Smaller Companies), industry (IA Healthcare, IA Technology and Technology Innovation) and investment aim (IA Targeted Absolute Return, IA Volatility Managed).

This information is intended to provide you with help and guidance about investing generally and about investing with Artemis. It is not a marketing communication and should not be used to make investment decisions. You should always refer to the relevant fund prospectus and KIID/KID before making any final investment decisions.

Artemis does not provide investment advice on the advantages or suitability of its products and no information provided should be viewed in this way. Should you be unsure about the suitability of an investment, you should consult a suitably qualified professional adviser.