Bogey

Bogey is a buzzword that refers to a benchmark used to evaluate a fund's performance and risk characteristics. A bogey provides an index benchmark that can serve as a close proxy for comparing the investment scope of a fund.

A bogey refers to a benchmark for a mutual fund that provides the investor with a representative sample of a market segment for which it can compare performance and other characteristics. Benchmarks can be identified and utilized in different ways. Some benchmarks may be relative and set by an investor for comparing their fund to the broad market or other investments across the industry. A bogey typically refers to a specific benchmark that is set by the fund company as a close comparison for the fund itself.

Investors use benchmarks to compare and contrast the performance of an index representing a market sample with various different types of funds and investments in the market. Benchmarks can be used for all kinds of purposes and can help an investor to get an idea of how market segments are performing across the industry.

The S&P 500 and Barclays U.S. Aggregate Bond Index provide two examples of benchmarks for U.S. equities and U.S. debt. Through April 20, 2018, the S&P 500 had a return of -0.95% and the Barclays U.S. Aggregate Bond Index had a return of -2.30%. These leading benchmarks are often used to help investors gauge the performance expectations of new investments in both equities and fixed income.

A bogey benchmark is often identified by a mutual fund company and referenced along with its objective and investment strategy in a fund’s registration documents and prospectus. Passive investment funds and their benchmarks provide a leading example of a bogey benchmark. These funds seek to replicate the performance and characteristics of an index with little return tracking or risk deviation. Other funds may use the bogey benchmark as the investment universe while building an investment strategy that seeks to outperform the benchmark. Furthermore, some investors may compare and contrast bogey benchmarks with relative benchmarks to gain a better understanding of how a fund and its benchmark are performing in comparison to other broad market options.

A bogey benchmark will have similar if not the same performance as a fund. One example of bogey benchmark analysis on a passive fund includes the Russell 3000 Index and the iShares Russell 3000 Index Fund (IWV). Through March 31, 2018 the Russell 3000 Growth Index had a return of -0.64% versus the return of -0.69% for IWV. For an investor looking at this investment in broad market terms they would see that IWV is closely tracking its bogey benchmark and has similar risk characteristics. In relative comparison this fund and its bogey benchmark are also outperforming the Barclays U.S. Aggregate Index with a return of -1.46%.