When should a government choose a benchmark to assess their performance?

Choosing a benchmark prior to the start of evaluation is critical for assessing performance accurately and effectively. This decision sets the standard against which the investment portfolio will be measured, allowing for a clear comparison of actual performance to expected performance.

Establishing the benchmark beforehand enables governments to align their investment objectives and strategies with appropriate performance metrics. It helps in clearly defining investment goals, understanding risk tolerances, and ensuring that the benchmark reflects the specific characteristics of the portfolio, such as asset allocation and risk exposure.

By selecting the benchmark in advance, governments can also avoid any bias or retrospective fitting that can skew the evaluation. This proactive approach ensures that the benchmark remains relevant and applicable throughout the evaluation period, providing a more objective basis for assessing investment success. Overall, the timing of the benchmark selection is essential to maintain the integrity and transparency of the performance assessment process.