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Choosing Investment Managers

Author

Listed:
  • Amit Goyal

    (University of Lausanne; Swiss Finance Institute)

  • Sunil Wahal

    (Arizona State University (ASU) - Finance Department)

  • M. Deniz Yavuz

    (Purdue University - Krannert School of Management)

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.

Suggested Citation

  • Amit Goyal & Sunil Wahal & M. Deniz Yavuz, 2020. "Choosing Investment Managers," Swiss Finance Institute Research Paper Series 20-63, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2063
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    Cited by:

    1. Beggs, William & Hill-Kleespie, Austin & Liu, Yanguang, 2022. "Mutual fund tax implications when investment advisors manage tax-exempt separate accounts," Journal of Banking & Finance, Elsevier, vol. 134(C).

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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