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Asset Managers: Institutional Performance and Factor Exposures
Author(s) -
GERAKOS JOSEPH,
LINNAINMAA JUHANI T.,
MORSE ADAIR
Publication year - 2021
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13026
Subject(s) - sharpe ratio , asset (computer security) , net asset value , sample (material) , business , index (typography) , variance (accounting) , institutional investor , asset management , actuarial science , economics , finance , accounting , computer science , portfolio , corporate governance , chemistry , computer security , chromatography , world wide web
Using data on $18 trillion of assets under management, we show that actively managed institutional accounts outperformed strategy benchmarks by 75 (31) bps on a gross (net) basis during the period 2000 to 2012. Estimates from a Sharpe model imply that asset managers' outperformance came from factor exposures. If institutions had instead implemented mean‐variance efficient portfolios using index and institutional mutual funds available during the sample period, they would not have earned higher Sharpe ratios. Our results are consistent with the average asset manager having skill, managers competing for institutional capital, and institutions engaging in costly search to identify skilled managers.