Yes, history shows investment managers do not consistently outperform benchmarks but investment managers need to be accountable for the returns their portfolios generate and the associated return risk. Aswath Damodaran, NYU Finance Professor, defines risk as the difference between beginning of period return expectations and end of period return results. This definition of investment risk should be central to holding the investment manager accountable for their portfolio management. Yes, investment managers should not focus on outperforming the market but instead focus on presenting their return expectations and each quarter reconciling beginning of period return expectations with end of period return results. In this way, investment managers will communicate to their portfolio investors the return risks the investors are exposed to by the investment managers.
The challenge with the need to ‘calibrate their risk tolerance’, ‘optimize the deployment of their capital’, and ‘maintain strategic continuity’ lies in making such tasks of the investment manager understandable and quantifiable to the investor in a clear way such that the investment managers can be held accountable for the investment risk taken in the portfolio.
Investment managers and plan sponsors prefer to focus on benchmark relative returns rather than the actual absolute portfolio return while the portfolio investors shoulder the actual return variability of the portfolio which the portfolio managers really need to be accountable for.
This linked post offers a solution ;
https://www.sec.gov/comments/265-28/265-28.shtml
refer to January 6 2023 dated SEC Comment file ‘Gap Attribution’