Virtual Reality? Investment Consultants’ Claims About Their Own Performance

46 Pages Posted: 8 Aug 2018 Last revised: 20 Jul 2021

See all articles by Gordon Cookson

Gordon Cookson

Office of Communications (Ofcom)

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Howard Jones

University of Oxford, Saïd Business School

Jose Vicente Martinez

University of Connecticut

Date Written: July 19, 2021

Abstract

Investment consultants market their services by claiming their fund manager recommendations add significant value. Using non-public data sourced from investment consultants and the UK regulator, we find no such evidence, but identify several practices that explain their exaggerated claims: comparisons to benchmarks instead of peers, inclusion of simulated and backfilled returns, use of investment horizons that allow losers to be forgotten, and unexplained exclusions of products from the analysis. Consultants do not fully disclose their methodology to investors, who therefore cannot verify or reliably compare their performance.

Keywords: investment consultants, recommendations, institutional asset managers, voluntary performance disclosures

JEL Classification: G20, G23, G24, L84

Suggested Citation

Cookson, Gordon and Jenkinson, Tim and Jones, Howard and Martinez, Jose Vicente, Virtual Reality? Investment Consultants’ Claims About Their Own Performance (July 19, 2021). Available at SSRN: https://ssrn.com/abstract=3214693 or http://dx.doi.org/10.2139/ssrn.3214693

Gordon Cookson

Office of Communications (Ofcom) ( email )

2a Southwark Bridge Road
London, SE1 9HA
United Kingdom

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/howard-jones

Jose Vicente Martinez

University of Connecticut ( email )

2100 Hillside Road, Unit 1041
Storrs, CT 06269
United States

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