Hedge Fund Benchmark Selection

This problem practices benchmark selection and performance evaluation, which are common themes in investment banking interviews because analysts need to judge returns in the context of a strategy’s true objective. A hedge fund is not always meant to track or outperform the market, so candidates should think about risk, absolute return goals, and whether the manager is trying to provide diversification, downside protection, or pure relative outperformance. Interviewers ask this kind of question to see if you can avoid a simplistic comparison and instead assess performance against the right standard for the mandate.