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| Before you create a blended benchmark, consider whether using a floating benchmark can provide more flexibility for future benchmark changes. Floating benchmarks include all functionality available with blended benchmarks and additionally offer the ability to define a reset frequency for rebalancing weights and to apply weights from another entity. |
Create a Blended Weighted Benchmark
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Calculate Weights and ReturnsThe Blended Benchmark calculator multiplies the beginning-of-period weights and the returns over the period for the source indexes to determine the contributions towards the blended benchmark return for the period. Then, the Blended Benchmark return equals the sum of these contributions.
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The weights below the total level, however, are different. PACE weights the weights to determine the weight of the security or segment in the new index. For example, if a stock is made up of 5 percent of the source index and the source index is 50 percent of the blended index, the stock is 2.5 percent of the blended index.
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Calculate Weights and Returns ExampleGiven the following dictionary assignment example:
Total:
Equity S&P 500 50 percent
Fixed Income:
Short Term LIBOR 25 percent
Long Term LEHMAN 25 percent
Assume the rates of return defined in the following table for the sample blended benchmark.
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