Oxford SWF Project

Ashby Monk

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…

Ashby Monk

Alas, more international travel is in my near future. I’ll be catching the SanFran-to-London-express tomorrow, as I’m heading back to the UK for a week to catch up with some colleagues at Oxford and attend Institutional Investor’s Global Sovereign Funds Roundtable. Once again, the Roundtable looks to be quite a remarkable event. It should be a lot of fun. If you’re attending, don’t hesitate to introduce yourself.

I generally put a few academic papers on my Kindle for long flights just in case a motivated mood should strike. And, for this flight, I’ve decided on the following two:

• Michael Hudson’s paper entitled “What Does Norway Get Out of its Oil Fund, if Not More Strategic Infrastructure Investment?”
• Federico Lasconi’s paper entitled “The Return of Zheng He? An Assessment of Chinese Sovereign Wealth Fund from a Law & Development Perspective.”

Both look quite interesting. Anyway, I’ll (try to) continue updating the blog from the road.