Benchmarking ReturnsLocked: included in All Access

Judging returns against a benchmark: money-weighted and time-weighted rates of return, and how an index is defined, weighted, calculated and managed.

1. 1. Money-weighted returnThe money-weighted return is the IRR of the investor's own cash flows: what the investor actually earned, given when and how much money went in and out.Locked: included in All Access13 min
2. 2. Time-weighted vs money-weighted returnThe time-weighted return strips out client cash flows, so it measures the manager; the money-weighted return measures the investor.Video · 7 minLocked: included in All Access14 min
3. 3. Which return to report: managers, investors and GIPSReport the time-weighted return when the manager cannot control client cash flows and the money-weighted return when the manager does control them (or when the investor wants their own result), and always build the cash flows from the investor's side.Locked: included in All Access12 min
4. 4. What an index is: value, price return and total returnAn index is a paper portfolio that stands for a market; its price return version tracks only price changes, while its total return version also reinvests every dividend and coupon, so it pulls further ahead over time.Video · 6 minLocked: included in All Access13 min
5. 5. Index objectives, custom indexes and choosing a versionAn index is a benchmark and a blueprint for passive funds, built in five steps from a stated objective; custom indexes bend the rules toward a target, and the right version (price or total return) and weighting depend on what the index is used for.Locked: included in All Access11 min
6. 6. Building an index: target market, constituents and weightingBuilding an index is like building a portfolio: choose the market to represent, pick the securities, decide how much of each to hold, and then decide when to rebalance and when to review the list.Locked: included in All Access12 min
7. 7. Price-weighted and equal-weighted indexesA price-weighted index lets the highest-priced share dominate and needs a new divisor after every split; an equal-weighted index gives every stock the same slice, which overweights small companies and drifts away from equal weights as soon as prices move.Video · 5 minLocked: included in All Access14 min
8. 8. Market-cap, float-adjusted and fundamental weightingMarket-cap weighting holds each stock in proportion to its market value, ideally counting only freely tradable shares; fundamental weighting uses size measures that ignore price, which tilts the index towards value stocks and works against momentum.Video · 5 minLocked: included in All Access14 min
9. 9. Rebalancing, reconstitution and what indexes are used forRebalancing resets weights to the index's rule and reconstitution changes which securities are in it; both create turnover, and the finished index then serves as a sentiment gauge, a market proxy, an asset-class proxy, a benchmark and a model portfolio.Locked: included in All Access13 min
10. 10. Rebalancing in shares, weight drift and reconstitution rulesRebalancing an equal-weighted index means recomputing the number of shares of each stock from the index's new value; if it is skipped, the weights drift and the index stops returning the simple average, and reconstitution follows a fixed rank-announce-implement process with buffers to limit turnover.Locked: included in All Access13 min