Picking Winners? Investment Consultants' Recommendations of Fund Managers
University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
University of Oxford, Saïd Business School
Jose Vicente Martinez
University of Oxford - Said Business School
June 13, 2014
Investment consultants advise plan sponsors how to invest funds totaling around $25 trillion worldwide. Using survey data, we analyze what drives consultants’ recommendations of institutional U.S. equity funds, what impact these recommendations have on flows, and how much value they add to plan sponsors. We find that consultants’ recommendations of funds are driven largely by soft factors, rather than the funds’ past performance, and that their recommendations have a very significant effect on fund flows. However, we find no evidence that these recommendations add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless.
Number of Pages in PDF File: 64
Keywords: asset management, investment consultants, fund performance, asset flows
JEL Classification: G20, G23, G30working papers series
Date posted: September 18, 2013 ; Last revised: June 14, 2014
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