Why You Should Fire the Family Office That Recommends Outside Hedge Funds

Following up on "Wha? "Family Offices Look to Invest More Than $30 Billion in Hedge Funds in Next Year"".

From the University of Oxford - Said Business School via the SSRN:
September 17, 2013

Picking Winners? Investment Consultants' Recommendations of Fund Managers

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.

Free download 47 page PDF