UK - Investment consultants have claimed that people matter more than past performance when it comes to managerial selection.
The talking point emerged after new Fidelity research found that local authority pension funds preferred specialist managers, and considered performance less important than people when it came to choosing managers.
Reacting to the research, consultants told Global Pensions they agreed with its findings.
Scott Vincent, head of global fixed income research at Russell, argued that splitting people and process into separate categories was perhaps not the correct approach.
He said: “People are the most important factor when selecting a manager. People create the processes. Processes also have a shelf life so you want a manager who can observe market conditions and make adjustments to reflect any changes.”
He added: “Past performance is useful to gauge what a manager should produce, but short term historical evidence is of very little use when looking into long term returns.”
Meanwhile, Craig Baker, global head of manager research at Watson Wyatt, said that unfortunately in the past there had been a tendency to choose managers based on past growth and not prospective returns, but hopefully this would change over time.
Baker stressed: “While it may well be a tired cliché, we strongly believe that past performance alone is a very poor guide to future performance. This is why we focus on the 'people' aspect when doing manager research and it is good to see this survey supports this.”
Regarding the shift to specialist managers, Baker said: “The trend away from balanced towards specialised management in the UK is now well established with the main beneficiaries being enhanced indexation and alternatives managers.”
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