I’m off to Washington, DC for the APEC Infrastructure Investment Workshop at the World Bank tomorrow and Thursday. I’ll be talking about some of the constraints limiting institutional investors’ interest in infrastructure as an investment opportunity. And I’ll be discussing innovative vehicles to facilitate access to the asset class. Anyway, that’s what I’m up to this week; it should be a lot of fun. But, first, it’s time to get on another airplane. So that means finding something to read.
For this flight, I decided to bring some research on the investment mandate decision-making of institutional investors. In other words, I’m interested in understanding some of the nuanced factors driving the hiring and firing of asset managers by large asset owners. And I’m also interested in the results of these decisions. The following two papers look like they may fit the bill.
First, Christopher R. Knittel, John J. Neumann and Scott Stewart have a paper entitled “Why do Institutional Plan Sponsors Fire Their Investment Managers?” Here’s a blurb:
“…while institutional investors consider investment style in evaluating product performance, the degree of style exposure is not considered. This raises the possibility of gaming by the fund managers, who are aware of their ability to manage their level of style exposure and that they are not being held accountable for this risk when evaluated by plan sponsors.”
Second, Amit Goyal and Sunil Wahal have a paper entitled “The Selection and Termination of Investment Management Firms by Plan Sponsors.” Here’s a blurb:
“Plan sponsors frequently, but not always, terminate investment managers after underperformance, but the excess returns of these managers after being fired are frequently positive. Using a matched sample of firing and hiring decisions, we find that if plan sponsors had stayed with fired investment managers, their excess returns would be larger than those actually delivered by newly hired managers.”
Anyway, if there’s any great insights, I’ll share. In the meantime, we’re boarding…