What happens when benchmarks change?

I received some interesting questions this week from someone regarding changes to a client's benchmark, which I thought would be worth sharing here.

I am gathering views from respected performance measurement professionals on an issue that has arisen with regard to benchmark performance. Within the scenarieo whereby at some point within the measurement period of a client’s portfolio there has been a change of benchmark (for example due to a change in investment strategy) would you agree with the following statements:

1. A client would still be interested in the performance of their portfolio over the full period of of measurement of their portfolio, spanning the two benchmarks.

This can absolutely be done. And, expected. Why would a change in the client's benchmark result in a cessation of full-period reporting?

2.  The client would expect the benchmark returns to be linked together accordingly in their client report.
 
This makes sense and appropriate. The investor surely wants to see the management vis-a-vis the benchmark, even if and when it changes.And we would expect the linking to reflect the multitude of  benchmarks which may have been used over the period.

3.  It is industry standard functionality within performance measurement systems for benchmark returns, spanning a change in benchmark, to be linked when this information is retrieved from the system?

Yes. This is a requirement in GIPS(R) (Global Investment Performance Standards).

Benchmarks often change. To avoid problems we would expect the historical benchmark(s) to remain, for the periods they aligned with.