Friday, 28 April 2017

Return Objectives

Absolute return objectives sate the percentage return desired by the client.  The return may be expressed on a real or nominal basis.

Relative return objectives express the required return relative to a stated benchmark.  A good benchmark should be investable i.e., an investor should be able to replicate it.

The return objective may be stated before or after fees and on a pre- or post-tax bais.

It could also be expressed in terms of a required return, that is, the amount an investor needs to earn over the investment horizon to meet a specified future goal.

The portfolio manager must ensure that the client's return objective is realistic in light of her tolerance for risk




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