Biggest winners in financial calamity: Investment consultants
| Mar 8th, 2010 | Filed under: Institutional Investing, Today's Post | By: Alpha Male |
Investment consultants are paid by institutional investors to anticipate what the future might bring – what asset allocations are safest, which managers are more likely to deliver alpha, and what liabilities a pension plan will face in the future.
But consultants seem to be absolutely inept at one thing: predicting the growth of their own businesses. In the latest installment of their “Annual Consultant Search Forecast,” management consultancy Casey Quirk and data vendor eVestment Alliance report that investment consultants underestimated 2009’s search volumes by a whopping 115% (on the basis of assets). Respondents to last year’s survey (conducted in last 2008) predicted a slight recovery in 2009 after a decidedly dismal 2008. But check out what actually transpired (chart created with data from 2009 edition available here and 2010 available edition here). More…
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All this through chasing return profiles, playing the “top quartile game”, and shielding themselves behind the absence of a track record. When will consultants start publishing a tack record of manager selected/recommended? Perhaps, and they know it, it would not be a good idea. We all know what happened to many fund of hedge funds that, by design, had a published tack record.
If manager selection is, at least in part, endorsed by the evidence of a good track record, it should be obvious that consultants should at least publish an independently monitored track record of their own.
Rene Levesque
http://www.mountjoycapital.com