What is the purpose of a benchmark in UITF performance evaluation?

The purpose of a benchmark in the context of UITF performance evaluation is to gauge or measure the performance of a UITF. A benchmark serves as a standard against which the returns of a specific UITF can be compared. By using a relevant benchmark, investors can determine how well the UITF is performing relative to a more stable index or similar investment options. This allows investors to assess the effectiveness of the fund manager's investment strategy and decision-making over a given period.

Benchmarks are usually composed of a collection of securities that represent a particular market or asset class, making them an essential tool for performance measurement. They provide critical context to performance figures, helping investors to understand if a UITF's returns are satisfactory, given the market conditions or compared to other investment alternatives.

While other aspects like setting target returns, assessing risk levels, or comparing management fees are essential elements of investment considerations, they do not directly relate to the primary purpose of a benchmark, which is fundamentally about performance evaluation.