In general, this means to do worse than some particular benchmark. Mutual Fund XYZ is said to underperform the S&P500 if its return falls short of the S&P500 return. However, this language does not take risk into account. That is, one might have a lower return than the benchmark in a particular year because of lower risk exposure. Underperform is also a term used by analysts to describe the prospects of a particular company. Usually, this means that the company will do worse than its industry average. Related: outperform.
Nearby TermsUnderlying security Undermargined account Underperform Underpricing Undertakings for Collective Investments in Transferable Securities (UCITS)
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University