Author Topic: Consistently beating an index (or the under-reporting of index returns)  (Read 1368 times)


  • Handlebar Stache
  • *****
  • Posts: 1237
Interesting article on why reporting index beating performance (and charging performance fees) is easier than it may seem:

In a nutshell, the index assumes a worst case treatment of tax between jurisdictions.  In practice, tax treaties between countries and the like result in a less than worst case outcome.  Hence the returns of the index are easier to beat than expected!

Interesting factoid.  I don't think it will change much in how I'm investing, but does help to explain a few things.  For example, I was struggling to understand the numbers in BT Investment Management's annual report, which showed that some 90% of their funds outperformed the index over 5 years (and made nice performance fees in the process).  With an artificially low benchmark to beat, this makes more sense.


Wow, a phone plan for fifteen bucks!