Annualised Performance
There is no single, specific, consistently applied measure to assess the performance of the default options in the DC market. Providers are using a wide variety of different comparators (peer group sectors, composite benchmarks, cash or inflation linked indices) depending upon the default strategy’s objectives and asset allocation. Providers have delivered returns of between 4.5% to 10.3% per year on a three-year annualised basis, highlighting the significance of the asset allocation and risk management processes to maximise members’ fund values. Risk is a measure of the degree of volatility the fund has shown via analysyis of the fund's actual returns and its average returns. The Information Ratio is a commonly used measure which measures the excess return against the benchmark (we have used CPI plus 3%) divided by tracking error, where tracking error is a measure of consistency.