Leading the Way? External Lead Managers and the Performance of Institutional Equity Funds

55 Pages Posted: 5 Jun 2017 Last revised: 21 Apr 2018

See all articles by Hyoung Goo Kang

Hyoung Goo Kang

Hanyang University

Min Yeon Han

Hanyang University

Sang-Gyung Jun

Hanyang University

Ji Yeol Jimmy Oh

Hanyang University

Date Written: February 22, 2018

Abstract

Institutional sponsors increasingly seek outside help in fund selection and capital allocation by delegating these decisions to external lead managers. Whether these intermediaries improve performance, however, are yet to be examined. We fill this gap with a unique dataset of Korean public sponsors that enables a detailed comparison of domestic equity funds selected by the sponsors and external lead managers, respectively. We find that lead managers enhance performance by (i) optimizing capital allocation and (ii) selecting more skilled end-level managers. Further evidence suggests this performance improvement primarily emanates from their ability to detach themselves from the sponsors’ internal organizational issues.

Keywords: Delegated portfolio management, institutional investors, intermediated investment management, outsourced CIO, investment pool

JEL Classification: G11, G20, G23

Suggested Citation

Kang, Hyoung Goo and Han, Min Yeon and Jun, Sang-Gyung and Oh, Ji Yeol Jimmy, Leading the Way? External Lead Managers and the Performance of Institutional Equity Funds (February 22, 2018). Available at SSRN: https://ssrn.com/abstract=2980734 or http://dx.doi.org/10.2139/ssrn.2980734

Hyoung Goo Kang

Hanyang University ( email )

222 Wangsimniro
Seongdong-gu
Seoul, 133-791
Korea, Republic of (South Korea)

Min Yeon Han

Hanyang University ( email )

Korea, Republic of (South Korea)

Sang-Gyung Jun

Hanyang University ( email )

Seoul
Korea, Republic of (South Korea)

Ji Yeol Jimmy Oh (Contact Author)

Hanyang University ( email )

School of Business #513
Wangsimni-ro 222, Seongdong-gu
Seoul, Seoul 04763
Korea, Republic of (South Korea)
+82222202689 (Phone)

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