DO PERFORMANCE BENCHMARKS IMPACT INVESTOR DECISIONS?
On September 15, 2022, the SEC’s Office of the Investor Advocate published a research report examining the impact of mutual fund performance benchmarks on investor decision-making and strategic behavior by firms. Specifically, the report contemplates whether, since financial regulations offer funds at least some discretion on the choice of benchmarks, this discretion raises the possibility that some funds could choose benchmarks strategically to make the fund appear more attractive to current or potential investors. The report’s hypotheses and outcomes are based on surveying investors within a controlled experiment with various qualitative and quantitative references. However, while the study is theoretical and not based on actual fund benchmark data, there are some key learnings from the research that suggest that investors prioritize information on investment performance and use it to make decisions that may affect their ability to meet their financial goals and achieve financial well-being.