Why doesn't an absolute return mandate meet all benchmark criteria?

An absolute return mandate is designed to achieve a positive return regardless of market conditions, which inherently distinguishes it from traditional benchmarks that usually track relative performance against a market index. The primary reason this mandate does not meet all benchmark criteria relates to its non-investable nature. Unlike traditional benchmarks that represent specific market segments and can be directly invested in, absolute return strategies often involve a diverse array of investment tactics, such as derivatives, short selling, and alternative assets, which do not correlate directly with a standard index.

Consequently, because absolute return strategies do not align with defined indices that investors can replicate or invest in directly, they fail to satisfy the investment community's criteria for being investable benchmarks. This lack of a directly measurable or investable benchmark makes it difficult for investors to gauge performance based on absolute return mandates relative to standard market indices.