Billions of Dollars Paid for Underperformance
By Hal M. Bundrick
NEW YORK (MainStreet) ¿ Universities, foundations, endowments and retirement plans may be spending billions of dollars for investment advice with little, if any, return. In fact, a study by a team of Oxford University researchers says mutual fund recommendations made by investment advisors simply do not outperform other investments.
Over $13 trillion of U.S. institutional assets are advised by investment consultants at a cost of billions of dollars per year. The result? An underperformance of about 1.1% annually, compared to other investments. And that's before fees were deducted.
The academics pored over thirteen years of survey data, examining the fund selection of actively managed U.S. equity mutual funds recommended by 29 investment consultants for the period 1999-2011. As of 2011, these advisors represented a 91% share of the U.S. consulting market.
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