In a down market, what's a PM to do?

Retail PMs should "closet-index,", a new study from Pace University and Touro College shows, reports Michael Shagrin of InvestmentNews. The study, which looked at fund performance and fund flows between 1997 and 2011, read that investors do not reward outperformance with higher flows, Shagrin writes.

When Shagrin asked why PMs would closet-index their asset allocation, Matthew Morey, New York Stock Exchange research scholar, gave a straightforward answer. "Well, they wouldn't have to do as much work," Mr. Morey said in an interview with Shagrin. "When fund managers aren't benefitting from performance, they're incentivized not to work as hard."

Shagrin did not interview any PMs for the piece.

To read more, click here.  

Edited by: Casey Quinlan


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