There’s no shortage of studies arguing that pension funds and endowments would have been wise to put the kibosh on their complex portfolios and opt for a simple passive strategy over the last five, 10, or 20 years.

But new research from Richard Ennis, one of the founders of investment consultant EnnisKnupp, details another fault line in the argument.

Benchmarks in investing, just as in sports or healthcare, are designed to measure performance, costs, risk, and other data points against peers or alternative approaches. The idea is to inject objectivity into the process. Ennis argues, however, that benchmarks in the public pension world do more to obscure the nature of portfolios than shine a light on what they could do better.

Benchmarks “are devised by the funds’ staff and consultants, the same parties that are responsible for recommending investment strategy, selecting managers, and implementing the investment program. In other words, the benchmarkers have conflicting interests, acting as player as well as scorekeeper,” wrote Ennis in his study published this week. Ennis, who said he’s no longer speaking publicly about the issues he’s researching, added in the study that public pension funds describe their benchmarks as “policy,” “custom,” “strategic,” or “composite,” but the end result is a measurement tool that is complex and hard for external parties to replicate.

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