Jason,

I greatly appreciated your piece. (As well as many of the comments) I agree with your assertion that benchmarks have created a problem. As an institutional manager I was often asked what benchmark I should be judged against. In most cases I told the client (or consultant) that that was their decision. That if they were in agreement with my investment philosophy and process (two very different things that I'm interested to see if your future writings will touch on) and choose me to run their money then I will do my very best to maximize their return and then we can compare it to whatever benchmark they see fit to better understand the returns that were produced. The benchmark should be used to review performance, not as a starting point for building a portfolio.

As far as the consultant (the middleman) being the problem I would offer the argument that it is the portfolio managers responsibility to establish a strong relationship with the end client. This is not to say that one should try and squeeze out the consultant. Rather, if a strong relationship is forged between manager and client where the client has chosen the manager for philosophy and process, (not statistical tables in a pitch book) then the performance review meeting will have much more of a partnership tone as opposed to a judgement panel feel. In my experience this is a preferable situation for the consultant as they are part of the partnership also, and not spending their time worried about having to defend their previous advice. (It also had the very positive effect of future positive recommendations from that consultant) Unfortunately, I believe, that too many managers view the client as judge and jury as opposed to a partnership with the common goal of investment returns.

I look forward to your future writings

Gerry