Choosing Investment Managers

Amit Goyal, Sunil Wahal and M. Deniz Yavuz
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Sunil Wahal: Arizona State University (ASU) - Finance Department
M. Deniz Yavuz: Purdue University - Krannert School of Management

No 20-63, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study how plan sponsors choose investment management firms from their opportunity set when delegating $1.6 trillion in assets between 2002 and 2017. Two factors play an influential role in choice: pre-hiring returns, and pre-existing personal connections between personnel at the plan (or consultant advising the plan), and the investment management firm. Post-hiring returns for chosen firms are significantly lower than those for unchosen firms. The post-hiring returns of firms with relationships are, at best, indistinguishable from those without relationships, and often significantly worse. While relationships are conducive to asset gathering by investment managers, they do not appear to generate commensurate benefits for plan sponsors via higher gross returns or lower fees.

JEL-codes: G10 G20 G23 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020-07
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2063

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