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Institutional Investor Expectations, Manager Performance, and Fund Flows

  • Howard Jones and Jose Vicente Martinez

Using survey data, we analyze institutional investors’ expectations about the future performance of fund managers and the impact of those expectations on asset allocation decisions. We find that institutional investors allocate funds mainly on the basis of fund managers’ past performance and of investment consultants’ recommendations, but not because they extrapolate their expectations from these. This suggests that institutional investors base their investment decisions on the most defensible variables at their disposal and supports the existence of agency considerations in their decision making.

Corresponding author
* Jones (corresponding author),, Saïd Business School, University of Oxford; Martinez,, School of Business, University of Connecticut.
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We are grateful to Stephen Brown (the editor), Shantaram Hegde, Tim Jenkinson, Andrew Lo, Rick Di Mascio, Thomas Noe, Tarun Ramadorai, Ian Tonks (the referee), and Peter Tufano for valuable comments, as well as to seminar participants at the Oxford-MAN Institute of Quantitative Finance and at the 2015 Financial Conduct Authority conference on asset management. We thank Greenwich Associates and eVestment for making available and explaining their databases, for assistance in building the combined data set, and for valuable insights on the analysis. We also gratefully acknowledge the help of research assistants Edward Coe and Oliver Jones.

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