Institutional Plan Sponsors Investment Decisions

Institutional Plan Sponsors Investment Decisions

A recent study using a dataset of 80,000 yearly observations of institutional investment product assets, accounts, and returns for  24 years (1984−2007) indicate that that plan sponsors may not be acting in their stakeholders’ best interests when they make rebalancing or reallocation decisions. Investment products that receive contributions subsequently underperform products experiencing withdrawals over one, three, and five years. For investment decisions among equity, fixed-income, and balanced products, most of the underperformance can be attributed to product selection.   Much like individual investors who switch mutual funds at the wrong time, institutional investors do not appear to create value from their investment decisions.  A copy of the entire report can be obtained from the CFA Institute (the report is free for members).