51 Pages Posted: 18 Sep 2013 Last revised: 8 Oct 2014
Date Written: September 26, 2014
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.
Keywords: asset management, investment consultants, fund performance, asset flows
JEL Classification: G20, G23, G30
Suggested Citation: Suggested Citation
Jenkinson, Tim and Jones, Howard and Martinez, Jose Vicente, Picking Winners? Investment Consultants' Recommendations of Fund Managers (September 26, 2014). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2327042 or http://dx.doi.org/10.2139/ssrn.2327042
By Marc Kramer