What is indicated by the "review preliminary benchmark" in the custom benchmark process?

The "review preliminary benchmark" stage in the custom benchmark process indeed indicates that adjustments can be made before finalizing the benchmark. This phase is crucial because it provides the opportunity to evaluate the initial benchmark formulation and make necessary changes to better align it with the investment strategy or the specific characteristics of the portfolio being benchmarked.

In practice, this means that stakeholders can assess whether the preliminary benchmark appropriately captures the intended risk and return objectives, as well as the investment universe. Making adjustments at this stage ensures that the final benchmark is an accurate reflection of the investment strategy, which aids in performance evaluation against a relevant standard.

Adjustments may involve altering weights, including or excluding certain asset classes, or refining the criteria for security selection. Ultimately, this flexibility allows for a more tailored approach, enhancing the relevance and effectiveness of the benchmark once it is fully finalized.