Paper from last year that I am just seeing:
Absence of Value – Stewart et al
Institutional plan sponsors are charged with investing over $10 trillion in assets for pension plans, endowments and foundations, yet there has been no comprehensive study examining whether or not their investment decisions contribute to their asset values. This paper utilizes a dataset covering 80,000 yearly observations of institutional investment product assets, accounts and returns over the period 1984-2007 to study this question. Results document that plan sponsors may not be acting in their stakeholders’ best interests when they make rebalancing or reallocation decisions. Investment products receiving contributions subsequently underperform products experiencing withdrawals over 1, 3 and 5-year periods. For investment decisions among equity, fixed income and balanced products, most of the underperformance can be attributed to product selection decisions. Tests suggest these results are not due to survivorship and other biases. Much like individual investors, who seem to switch mutual funds at the wrong time, institutional investors do not appear to create value from their investment decisions. In fact, the study estimates that over $170 billion were lost over the period examined.