Interesting article on why reporting index beating performance (and charging performance fees) is easier than it may seem:
http://cuffelinks.com.au/global-index-flaw-flow-on-consequences/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.