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Virtual Reality? Investment Consultants’ Claims About Their Own Performance

Author

Listed:
  • Gordon Cookson

    (Ofcom, London SE1 9HA, United Kingdom)

  • Tim Jenkinson

    (Said Business School, University of Oxford, Oxford OX1 1HP, United Kingdom)

  • Howard Jones

    (Said Business School, University of Oxford, Oxford OX1 1HP, United Kingdom)

  • Jose Vicente Martinez

    (School of Business, University of Connecticut, Storrs, Connecticut 06269)

Abstract

Investment consultants market their services by claiming their fund manager recommendations add significant value. Using nonpublic data sourced from investment consultants and the UK regulator, we find no such evidence, but identify several practices that explain their exaggerated claims: comparisons to benchmarks instead of peers, inclusion of simulated and backfilled returns, use of investment horizons that allow losers to be forgotten, and unexplained exclusions of products from the analysis. Consultants do not fully disclose their methodology to investors, who therefore cannot verify or reliably compare their performance.

Suggested Citation

  • Gordon Cookson & Tim Jenkinson & Howard Jones & Jose Vicente Martinez, 2022. "Virtual Reality? Investment Consultants’ Claims About Their Own Performance," Management Science, INFORMS, vol. 68(11), pages 8301-8318, November.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:11:p:8301-8318
    DOI: 10.1287/mnsc.2021.4218
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    References listed on IDEAS

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