New Saїd Business School studies find the influence of investment consultants exceeds their performance and call for greater transparency on reporting results

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Investment consultants hold huge power, influencing trillions in funds, but a lack of disclosure on performance means it’s almost impossible to assess the value they add in fund selection. These new studies call for a disclosure regime to improve industry competition and enable greater efficiency in the allocation of institutional assets.

The market power of investment consultants is huge. They advise pension funds and other institutional investors managing $25 trillion worldwide ($13 trillion in the U.S.) on which funds to invest in. Consultants are courted by the funds themselves, desperate for the nod of approval which can attract billions in additional assets to manage. And yet the consultants, who are so ruthless in their scrutiny of fund managers, do not disclose their past manager recommendations in a way which would allow any proper analysis of their own performance, according to Professor Tim Jenkinson, Dr Howard Jones and Dr Jose Martinez of Saїd Business School in two new studies on the power and performance of investment consultants.

‘The enormous power wielded by consultants is not matched by their performance,’ says Dr Martinez. Using data on investment consultants with a 90% market share, the authors find no evidence that the US Equity funds recommended by the consultants do any better than others; indeed, on an equal weighted basis, recommended products do significantly worse, underperforming other funds by 1.1% per annum.

‘In U.S. Equities, one of the largest asset classes, investment consultants as an industry appear to add no value in fund selection,’ adds Dr Jones. ‘Plan sponsors need to be able to assess the track record of investment consultants but since consultants do not disclose their individual recommendations, pension funds are allocating assets on advice the quality of which it is impossible to judge. It is high time that the pension funds or regulators required consultants to disclose their past recommendations. Unless investment consultants are ashamed of their performance, they should come out of the shadows.’

‘Our research has clear implications for policy,’ says Professor Jenkinson. ‘A disclosure regime is needed like that followed by research analysts who disclose the past recommendations for all the stocks they cover. This gives investors an idea of the value of the analysts’ input. Disclosure along these lines would make the consultant industry more competitive, and the allocation of institutional assets would be more efficient.’

Notes to editors

1    About the research

The findings above arise from two research papers:
How institutional investors form and ignore their own expectations’ (Aug. 2013)
Howard Jones and Jose Vicente Martinez

Picking winners? Investment consultants' recommendations of fund managers’ (Sept. 2013)
Tim Jenkinson, Howard Jones, and Jose Vicente Martinez

The two papers:
o    use survey data, which includes aggregate investment consultants’ recommendations
o    compare consultants’ recommendations with
1.    The allocation of assets to those funds by plan sponsors (to see how influential the recommendations are)
2.    The performance of the recommended funds against other funds (to see how useful the recommendations are)
o    analyse recommendations by consultants of US equity funds between 1999 and 2011

2    About Saїd Business School

Saïd Business School at the University of Oxford blends the best of new and old. We are a young, vibrant, and innovative business school, but yet deeply embedded in an 800 year old world-class university. We create programmes and ideas that have global impact. We educate people for successful business careers, and as a community seek to tackle world-scale problems. We deliver cutting-edge programmes and ground-breaking research that transform individuals, organisations, business practice, and society. We seek to be a world-class business school community, embedded in a world-class University, tackling world-scale problems.

In the Financial Times European Business School ranking (Dec 2012) Saïd is ranked 12th. It is ranked 13th worldwide in the FT’s combined ranking of Executive Education programs (May 2013) and 24th in the world in the FT ranking of MBA programs (Jan 2013). The Oxford MSc in Financial Economics is ranked 4th in the world in the FT ranking of Masters in Finance programs (June 2012). In the UK university league tables it is ranked first of all UK universities for undergraduate business and management in The Guardian (May 2012) and has ranked first in eight of the last nine years in The Times. For more information, see


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Josie Powell
University of Oxford
+44 1865288403
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Clare Fisher
University of Oxford
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