Investment Consultants’ Claims About Their Own Performance: What Lies Beneath?
40 Pages Posted: 8 Aug 2018 Last revised: 26 Oct 2018
Date Written: July 19, 2018
Investment consultants market their services by claiming that their fund manager recommendations add significant value. Using detailed data from the leading investment consultants we find no such evidence. A forensic analysis of consultants’ disclosures reveals a number of practices that explain their claims: comparisons to benchmarks rather than to peers, inclusion of simulated and backfilled returns, use of rating survivorship conditions, and unexplained exclusions of products from the analysis. We find that recommended products have similar return and risk characteristics to products that are not recommended, but deviate less from their benchmarks.
Keywords: Investment consultants, recommendations, institutional asset managers, voluntary performance disclosures
JEL Classification: G20, G23, G24, L84
Suggested Citation: Suggested Citation