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Comparison Universe

Comparison Universe

What Is a Comparison Universe?

A comparison universe is a grouping of professionally managed investment portfolios or funds with comparative commands and objectives that fills in as a benchmark for performance. That is, the performance of each managed portfolio or fund can be promptly measured against the average for all individuals from the peer group.

Lipper and Morningstar are the companies that make the most-utilized comparison universes.

Grasping a Comparison Universe

Index Benchmark versus Comparison Universe

The performance of a professionally-managed portfolio or fund can be assessed in two ways:

  • The first is the index benchmark. Each mutual fund or professionally-managed portfolio is made fully intent on surpassing the performance of an index that best mirrors its selection of stocks. A mutual fund made up basically of energy stocks could have the stated aim of meeting or beating the performance of the S&P 500 Energy index in a similar period.
  • The second is the comparison universe. In this case, a fund or portfolio's performance is compared against the average performance of the universe of comparative portfolios.

Lipper Group and Morningstar

The Lipper Group, presently owned by Thomson Reuters, was quick to make comparison universes for the purpose of contrasting the relative performance of fund managers, in 1973. The manager of a fund that surpasses its peer universe has boasting rights to a performance that is "over the Lipper Group average."

Morningstar, Inc., the Chicago-based financial services company, delivers its own comparison universe groups. They are not profoundly unique yet financial firms generally pick either to use as a reference.

The two companies make separate universes for huge cap funds, small-cap funds, and in the middle between. Also, the companies offer comparison universes for sectors, international funds, and assets other than stocks, for example, investment-grade bonds.

They likewise track universes of blended funds that integrate stocks, bonds, and other high-yield investments like preferred stocks.

Upsides and downsides of a Comparison Universe


A few pundits believe the two forms of comparison universes to be too broad to be effective measures of fund performance. For instance, a fund manager who handles a value stock fund could protest a direct comparison of the fund's performance with Morningstar's enormous cap comparison universe.

One more perceived drawback is that a comparison universe essentially could set a ridiculously high benchmark by either excluding inadequately performing managers who are presently not in that frame of mind by including those whose assets are merged with those of another manager. This last option issue is called survivorship bias.


The size of the fund or money management firm in terms of assets under management is one more consideration in making a pertinent comparison universe. The best money managers generally figure in the top quartile of their comparison universes on a predictable basis, not just for a couple of quarters or a couple of years.

The benefit of a comparison universe is that it offers one more type of benchmark completely. A portfolio that reliably beats its index benchmark however routinely misses the mark regarding its comparison universe is showing a problem: Either it's in some unacceptable comparison universe or its benchmark is too simple to beat. That could be on the grounds that the fund regularly faces more relative risks challenges are reflected in the index.


  • A comparison universe is a grouping of comparative professionally-managed funds made as a measure of the relative performance of every one of its parts.
  • Lipper and Morningstar are the two fundamental wellsprings of comparison universes in the U.S.
  • The comparison universe turns into a benchmark against which the professional manager's outcomes are compared. The manager might match, surpass, or underperform the universe.