Does Portfolio Turnover Exceed Expectations?

7 Pages Posted: 6 Oct 2010 Last revised: 19 Aug 2011

See all articles by Danyelle Jann Guyatt

Danyelle Jann Guyatt

Collaborare Advisory Pty Ltd; University of Bath

Jon Lukomnik

Sinclair Capital LLC; IRRC Institute

Date Written: October 1, 2010

Abstract

This comparison of expected versus realized turnover in institutional equity portfolios reveals that 65%of portfolios turn over more than expected, some by large amounts.Manager interviews indicated they were aware that excessive turnover was potentially harmful to their clients. They cited volatile markets, hedge fund activity, signals from clients, and short-term incentives among the causes for their actions. Pension funds would be wise to include an expected turnover rate in their manager mandates, and to ask for an explanation when the actual turnover rate significantly exceeds that expectation.

Keywords: Churn, Institutional Asset Management, Short-termism, Investment Horizon, Pension Fund, Turnover

Suggested Citation

Guyatt, Danyelle Jann and Lukomnik, Jon, Does Portfolio Turnover Exceed Expectations? (October 1, 2010). Rotman International Journal of Pension Management, Vol. 3, No. 2, p. 40, Fall 2010. Available at SSRN: https://ssrn.com/abstract=1687783

Danyelle Jann Guyatt (Contact Author)

Collaborare Advisory Pty Ltd ( email )

Street
Street
Melbourne, Victoria 3000
Australia

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Jon Lukomnik

Sinclair Capital LLC ( email )

924 West End Avenue, Suite T-4
New York, NY 10025
United States

IRRC Institute ( email )

New York, NY
United States

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