The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

The Economy & You #34: Understanding How the State Investment Board Uses Benchmarks


Russell 3000 historical graph

Russell 3000 historical graph (Photo credit: Wikipedia)

Recently an article appeared in the May 2012 WRS News newsletter that I thought was informative as to how the State of Wisconsin Investment Board (SWIB) utilizes stock indexes to formulate their performance benchmarks.  The article has been reprinted here for your review.

Benchmarks and indexes are two words that stick out when reading about investments and the Wisconsin Retirement System (WRS). But understanding what they mean and how the State of Wisconsin Investment Board (SWIB) uses them can be confusing.

Can you compare the Dow Jones or the S&P 500 Index directly to SWIB’s benchmarks? The answer is no.

The Core Fund includes a mixture of asset types including domestic and international stocks, real estate and bonds. Because of its diversity, the Core Fund benchmark is mainly a composite of several market indexes including the Russell 3000, considered a measure of the U.S. stock market as a whole, along with several international indexes, bond indexes and measures for other asset classes. The Variable Fund includes the Russell 3000 and Morgan Stanley World Index ex U.S. plus emerging markets, which reflects the mix of U.S. and international stocks.

SWIB uses these indexes as part of the decision-making process when setting investment benchmarks. For 2011, SWIB exceeded its benchmarks for both the Core and Variable Trust Funds. SWIB’s trustees and a consultant review and set the total fund, each asset class and individual portfolio benchmarks. To the best extent possible, a portfolio benchmark represents the class, or range, of investments that the manager is allowed to use for investment. The investment objective is then to perform better than the applicable benchmark.

Here are the two stock indexes used by SWIB to establish benchmarks.


A market-capitalization-weighted index maintained by Morgan Stanley Capital International (MSCI) and designed to provide a broad measure of stock performance throughout the world, excluding U.S.-based companies. The MSCI All Country World Index Ex-U.S. (MSCI ACWI Ex-U.S.) includes both developed and emerging markets.


The Russell 3000 Index is one of 21 U.S. equity indexes produced by the Frank Russell Company that are market cap-weighted. It includes only common stocks incorporated in the U.S. and its territories and represents 98 percent of the investable U.S. equity market. The Russell 3000 is considered a measure of the market as a whole.

These are other, well known indexes that reflect the general market performance, but are not used by SWIB when setting benchmarks.


The Dow Jones is the most widely used indicator of the overall condition of the U.S. stock market. It is a price-weighted average of 30 actively traded blue chip stocks.


The S&P 500 is widely regarded as the standard for measuring large-cap U.S. stock market performance. This index includes a representative sample of 500 leading industries.


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