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The Factsheet Tricks, 10 of 10

The flattering yardstick

Compared with an easy benchmark, a "peer average", or nothing at all.

What it is

"Beat the benchmark" depends entirely on which benchmark. Compared with something that takes far less risk, almost any investment looks ahead. Without a risk adjustment, more risk can pass for more skill.

Why it works

  • EU guidelines ask for the same benchmark as the fund's legal documents.E22
  • Over the 20 years to 2025, more than 9 in 10 US large-cap active funds did worse than the S&P 500.E2
  • After costs, the average actively managed dollar must earn less than the market.E5
Example Growth FundFactsheet, page 1

Illustration, not a real fund

  • Ahead of its benchmark by 13.21% a year

    Against a cash-like yardstick that barely moves with it (correlation 0.19). Against a relevant market index (correlation 0.89), the same fund was ahead by 1.41% a year.

Illustrative fund and benchmarks, synthetic data, Jul 2016 to Dec 2024. Figures computed by the openfactsheet library.

How to spot it

  • Ask whether the benchmark is something you could actually have invested in instead.
  • Check that it is the same benchmark every year, and in the legal documents.

What OpenFactsheet does

Compares with the benchmark you choose, and always reports risk-adjusted results.

Get a free second opinionTry the example

Sources

  • E22 U.S. SEC (2020). Press release 2020-334, Investment Adviser Marketing Rule. U.S. SEC (2021). Investment Adviser Marketing, final rule, 86 FR 13024. ESMA (2021). Guidelines on marketing communications under the Regulation on cross-border distribution of funds, ESMA34-45-1272.
  • E2 S&P Dow Jones Indices (2026). SPIVA U.S. Scorecard, Year-End 2025.
  • E5 Sharpe, W.F. (1991). "The Arithmetic of Active Management." Financial Analysts Journal 47(1), 7–9. (Author's archive.)

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Your money deserves more than a sales pitch. These are techniques, not accusations. We don't name or rate any fund or firm.

OpenFactsheet does not name, rate or recommend any investment or firm. The practices described are documented in research and regulation; see Sources.