Do investment consultants identify the best investment funds?
A recent study from the University of Oxford business school concluded that, on an equal-weight basis, the average returns for investment consultant suggested funds are actually around 1% lower annually than those of other funds.
In 2015 Tim Jenkinson, from the University of Oxford business school, and two associates published an article in the prestigious The Journal of Finance that used past data to directly assess whether or not the recommendations made by investment consultants successfully predict better performance.
The study was conducted using a data set of U.S. actively managed equity funds over a 13-year period. Performance was defined relative to the gross and net of the fund managers’ fees. Various pricing models were used, and returns were compared relative to suitable industry benchmarks.
While some investment consultants argue that they can identify the best funds, this study suggests that on average they don’t.