Are Professional Investment Managers Skilled? Evidence from Syndicated Loan Portfolios

62 Pages Posted: 29 Mar 2014 Last revised: 28 Mar 2017

See all articles by Roberto Liebscher

Roberto Liebscher

Catholic University of Eichstaett-Ingolstadt

Thomas Mählmann

Catholic University of Eichstaett-Ingolstadt

Date Written: March 25, 2015

Abstract

Theory predicts that individual investor's incentives to uncover new information about asset values are low if asset prices are efficient. This, in turn, implies that heterogeneity in investment manager skill, if present, should be most clearly visible among managers that focus on asset classes with less informationally efficient prices. We investigate this argument using a large sample of syndicated bank loan portfolios managed by collateralized loan obligation (CLO) managers. Using a CLO's equity tranche cash-on-cash (CoC) return to measure performance, we find strong persistence that is robust to an extensive set of risk controls. While investors seem to derive their expectation about management quality from a manager's realized performance and allocate more capital to "skilled" managers, top performers cope to stay ahead net-of-fees. This questions the rationality of managers and the efficiency of the syndicated loan market.

Keywords: Collateralized Loan Obligations, Credit Trading, Manager Quality, Performance Measurement, Securitization

JEL Classification: G21, G23, G24

Suggested Citation

Liebscher, Roberto and Mählmann, Thomas, Are Professional Investment Managers Skilled? Evidence from Syndicated Loan Portfolios (March 25, 2015). Management Science, Forthcoming; Paris December 2014 Finance Meeting EUROFIDAI - AFFI Paper. Available at SSRN: https://ssrn.com/abstract=2417082 or http://dx.doi.org/10.2139/ssrn.2417082

Roberto Liebscher (Contact Author)

Catholic University of Eichstaett-Ingolstadt ( email )

Auf der Schanz 49
Ingolstadt, D-85049
Germany

Thomas Mählmann

Catholic University of Eichstaett-Ingolstadt ( email )

Auf der Schanz 49
Ingolstadt, 85072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
237
Abstract Views
1,743
rank
134,372
PlumX Metrics