Benchmarks help to analyze strategies by putting the results in context. There is no set rule on which benchmark to use. Generally, we use benchmarks with a similar risk level as our investment but not necessarily the same asset classes.
We typically use a proxy for the overall stock market for aggressive stock growth strategies. Specifically, we use S&P 500 ETFs, which capture capital gains and dividends paid. This benchmark reflects that typical growth portfolios build on stocks, and we expect growth strategies to have a positive correlation to the stock market. Further, the benchmark allows a comparison of the strategy's ability to handle recession periods.
For less aggressive or cross-asset strategies, we use a Vanilla 60/40 portfolio. This benchmark reflects the goal of reducing portfolio volatility and is relevant because stock/bond portfolios are the ubiquitous approach to portfolio construction.