State of the art in professional asset management research
The Erasmus Centre for Mutual Funds and Hedge Funds proudly organised the Seventh Conference on Professional Asset Management on 26 and 27 May.
Focused on the asset management industry – investment funds, hedge funds and related investment vehicles – the conference is one of a series of conferences in finance organised at Erasmus University every year. All events are relatively small, with 50 to 100 participants, but they do attract top researchers in their respective fields. Indeed, “the reputation of the Professional Asset Management conference is very good,” according to its chair, <link people marno-verbeek>Professor Marno Verbeek. “Out of 70 submissions, an international programme committee selected the twelve best papers.”
Including two keynote presentations, the two-day conference featured 14 speakers and discussants. International experts presented their most recent research related to the asset management industry, with many innovative findings and, sometimes, provoking conclusions.
Research findings
There is no proof of the added value of investment consultants, found Jose Martinez of the University of Oxford and his co-authors. Investment consultants advise large asset management companies, such as pension funds, on their investment decisions. Their recommendations are taken seriously and have a significant impact on how asset management companies allocate their capital. Yet the researchers showed there is no evidence that recommendations by investment consultants have any predictive value.
In similar vein, many hedge fund boards, which are meant to oversee hedge fund managers, are valued by investors but do not bring about any tangible benefits, argued Willam Gerken of the Univerity of Kentucky and his fellow researchers. Located offshore, hedge funds are served by an industry that supplies members to its boards. The board members themselves can be on 50 to 100 boards at the same time – too many to make a difference. Still, investors are involved with what happens on hedge fund boards – they respond when board members quit, for example.
Markets are efficient, holds one of finance’s paradigms. It stipulates that accounting information is incorporated in asset prices soon after it becomes available. In his keynote, Mark Grinblatt of the UCLA Anderson School of Management challenged this view, demonstrating that analysing accounting information to determine whether a company is overvalued or undervalued compared to its fundamental value – fundamental analysis – actually pays off. With a specialised statistical approach he and his co-author have dubbed a naïve form of fundamental analysis, he demonstrated that fundamental analysis works better than anyone had anticipated.
Investment funds are increasingly organised in fund families. For example, Fidelity, a multinational financial services corporation, manages 200 to 300 investment funds. Matthew Spiegel of Yale School of Management and his co-authors examined the benefits of such fund families. Their findings relate to ‘human capital,’ or the talent of fund managers. That talent comes into its own better within a family structure, because it enables the optimal allocation of managers across funds. The most talented managers can be strategically deployed to manage those funds with the greatest potential to attain bigger market shares.
Related events:
- <link events detail>Research in Behavioural Finance Conference 2014
- <link events detail>Executive Compensation
- Erasmus Credit Conference
- <link research centres finance-group seminars erasmus-finance-seminar _blank>Erasmus Finance Seminars
