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 Connecticut
September 26, 2014
Journal of Finance, Forthcoming
Investment consultants advise institutional investors on their choice of fund manager. Focusing on U.S. actively managed equity funds, we analyze the factors that drive consultants’ recommendations, what impact these recommendations have on flows, and how well the recommended funds perform. We find that investment 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: 51
Keywords: asset management, investment consultants, fund performance, asset flows
JEL Classification: G20, G23, G30
Date posted: September 18, 2013 ; Last revised: October 8, 2014
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