Hi, I’m Chris Flynn, Head of Research and Analytics at CEM Benchmarking.

One of the projects my team tackled last year focused on different approaches to performance benchmarking. We conducted this research on behalf of our Maple Middle community. Andrew Kaufman, a member of my team, led the work and explored various ways to categorize funds based on how they approach benchmarking decisions.

One particularly useful framework Drew developed looked at the extent to which funds fine-tune or adjust their benchmarks. He identified three categories: Benchmark Engineers, Benchmark Tailors, and Benchmark Minimalists.

At one end of the spectrum, Engineers make extensive adjustments to their asset class benchmarks—by region, sector weights, leverage, currency, and sometimes even duration.

On the other end, Minimalists typically use straightforward, market-cap-weighted benchmarks with little or no adjustments.

Tailors sit somewhere in the middle. They make some adjustments—often tied to specific views, exposures, or operational preferences—but not to the same degree as Engineers.

Let me give you an example. For private equity:

• An Engineer might use a benchmark that’s 50% U.S., 25% Europe, and 25% absolute return—with lagged public market proxies and a premium applied across the board.

• A Minimalist might simply use a global small-cap equity benchmark.

• Tailors land somewhere in between.

What’s interesting is that the extent to which a benchmark is customized often reflects who owns the benchmark, rather than the asset class itself. So it’s not that private equity requires more adjustment than infrastructure—it's that Engineers engineer all their benchmarks, while Minimalists apply minimal adjustments consistently across all asset classes.

You might think this simply reflects fund size or complexity. That’s partly true. As funds grow and add sub-strategies, benchmarks do tend to become more complex. But it’s also a matter of philosophy.

We’ve seen funds evolve from Minimalists to Engineers—and then return to being Minimalists. As an Engineer, you're aligning the benchmark’s risk factors closely with those of your portfolio to isolate alpha. But that introduces two challenges:

1. Stakeholders may not recognize or understand complex benchmarks—they prefer something simple and investable.

2. When portfolio construction is baked into the benchmark, it becomes harder to measure the success of that activity separately.

So sometimes, as funds delegate portfolio decisions to internal teams, they revert to minimalist benchmarks that better reflect performance outcomes.

This framework has been really helpful in peer conversations—assessing where a fund is today, where it wants to be, and how it compares to others.

We’re running this project again this year, this time with our Stars and Stripes community of large U.S. public pension funds. If you’re interested in learning more—either about this year's project or ongoing work—please reach out to your Relationship Manager or contact Chris Doll at chrisd@cembenchmarking.com