Most equity funds are benchmarked to market capitalisation weighted indices. A large investor may wish to design nonmarket capitalisation weighted benchmarks to maximise the benefit to the investor of the stock picking ability of active portfolio managers. We introduce a generic modelling framework which takes sector characteristics, manager skill, risk-taking appetite and market states into consideration. Our simulations may guide the design of customized benchmarks which offer investment capacity and increase the benefit of an active investment process.

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