Picking Winners? Investment Consultants’ Recommendations of Fund Managers

Source: Tim Jenkinson, Howard Jones, Jose Vicente Martinez, University of Oxford, Saïd Business School, September 17, 2013

From the abstract:
U.S. plan sponsors managing over $13 trillion rely on investment consultants for advice about which funds to invest in. Using survey data, we analyze what drives consultants’ recommendations of institutional funds, what impact these recommendations have on flows, and how much value they add to plan sponsors. We examine the aggregate recommendations of consultants with a share of over 90% of the U.S. consulting market. We find that 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, but we find no evidence that these recommendations add value to plan sponsors.
Related:
How Institutional Investors Form and Ignore Their Own Expectations
Source: Howard Jones, Jose Vicente Martinez, University of Oxford, Saïd Business School, August 27, 2013