Investment Beliefs: The Importance of Focus for an Institutional Investor
Working paper prepared for the ICPM / Netspar / Maastricht University Joint Discussion Forum, October 29-31, 2007
30 Pages Posted: 13 Dec 2008
Date Written: October 27, 2007
We investigate the building blocks for institutional investors' successful investment strategies. We focus on organizations which formulate investment beliefs and define clear views on how the capital markets work. We present the results of a world wide survey of investment beliefs. We find striking differences in how asset managers and pension funds view capital markets, and what they believe is their added value.
We link investment beliefs to performance measures and find that pension funds with beliefs on risk diversification show better return-risk performance measures, but also lower costs. Also, funds that hold clear views on risk management realize higher alpha and return/risk ratios.
Keywords: Investment strategy, Pension funds, Asset managers
JEL Classification: G23, G11, G12
Suggested Citation: Suggested Citation