Blacket Research, 2006
The report was based on UK shortlist data collected from pension funds. It applied a number of statistical measures to determine if the consultant's advice added value to the short list process. It concluded that consultants added no value when compared to random selection of managers in the shorter term. However, over longer periods (four years) the consultants short list recommendations did add value. Delegation of the final decision to an Investment Committee, as opposed to the decison being taken by the full trustee board, was found to significantly improve the probability of selecting an outperforming manager.
by Heisler, J. Knittel C. R. Neumann, J. J. and Stewart, S. D. Working Paper
The authors find, based on US data, that investment products to which money is moved subsequently underperform products from which it is drawn. In allocation decisions among equity, fixed income and balanced investment products, most of that inferior performance is attributed to a combination of style and manager selection decisions. In decisions focusing exclusively on the equity asset class, under-performance is shown to be due primarily to manager or product selections.
by Plan Sponsors, Goyal, A. and Wahal, S. Journal of Finance, August 2008
The research, based on US data, examines the selection and termination of investment management firms by 3,400 plan sponsors between 1994 and 2003. They conclude that plan sponsors hire investment managers after large positive excess returns but that this does not deliver positive excess returns after hiring. Furthermore, they find that if plan sponsors had stayed with the fired manager then excess returns would be no different to the returns delivered by the newly hired manager.
Consultants were found to add value to hiring decisions on average , but they destroy value in advising larger schemes.