The fund benchmark is the stock market index that the fund is aiming to match (or ‘track’). A fund may track one index or several (‘indices’) and they’re shown in the fund's Key Investor Information (PDF, 115 KB). For example, a well-known index is the ‘FTSE All Share Index’ which is used by several of our funds.
Because an index is just an indicator of how markets are performing – it doesn’t include any of the costs of fees or charges. But our fund performance does – so you’d always expect fund performance to be lower than the benchmark.
There will also be other differences between our fund and the benchmark. For example, from time to time, the organisations who control the index will add or remove individual companies from the index. That happens seamlessly for the index but it means we have to sell existing investments and buy new ones. This takes time and cost to do and can impact how closely we can match or track the index. There are also other things happening in the real world, including the effect of taxation and when we pay or receive money, which don’t affect the benchmark in the same way.