Performance and Survival of Institutional Money Managers
38 Pages Posted: 3 Oct 2005
Date Written: September 20, 2005
This paper examines the first survivorship bias-free panel dataset of equity portfolio managers who manage portfolios primarily for pension funds. We find that portfolios cease to exist at an average rate of 1.68% per quarter from June 1993 to December 2004. Survival bias is 74.1 basis points per quarter using average returns but only 35.5 basis points in asset weighted returns. The survival probabilities form a non-stationary process and depend on the quarter that a portfolio is started. Duration analysis shows that survival depends on portfolio age. We calculate time varying alphas. Using gross returns, the average Jensen's alpha of these portfolios is positive, but Fama and French three and Carhart four factor alphas are negative. We document alpha dependence on holding period length and starting point.
Keywords: institutional money managers, pension funds, performance evaluation, survivorship bias
JEL Classification: G1, G2, L1, L2
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