Obsession with short-term performance against market cap benchmarks preordains the dysfunctionality of asset markets.
The problems start when trustees hire fund managers to outperform benchmark indexes subject to limits on annual divergence. For multi-asset portfolios the benchmark is generally the performance of peer group funds, also based on market cap. In the absence of formal instructions, asset managers, as well as off-the-peg mutual funds, are still keen to demonstrate.
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