Mutual Fund Style Analysis
The most common method is to look at the size or market capitalization of securities in its portfolio, and the characteristics of the securities such as the P/E or Price to Book ratios.
The benchmark that is used to compare the fund's performance can be determined by the investment objective, or the fund's "style".
Professor William Sharpe (1990 Nobel Prize Winner), developed a methodology for determining a manager's style called, returns-based style analysis. Sharpe compared a fund's performance with distinct segments of the equity markets.
According to Prof. William Sharpe's study, the differences in performance of U.S. equity mutual funds can be attributed to the differences in their exposure to investment style.