Benchmark versus normal portfolio for true active return

[cfa09]

Benchmark portfolio vs normal portfolio .
Simple explanation ?

 

[ozzy609]

I think of this as the investors benchmark versus the portfolio managers benchmark.

 

[Magix]

u are a small cap portfolio manager who generates a total return of 20%
the investor who’s fund you are managing measures you against the market index (benchmark portfolio) which generates a total return of 15%
the small-cap index (the normal portfolio u should actually be measured against) generates a return of 18%
total active return is: ur portfolio - market index/benchmark index or 20%-15%
true active return is: ur portfolio - smallcap index/normal portfolio or 20% - 18%
misfit return is: normal portfolio return - benchmark index or 18% - 15%