2016年-FCA英国金融行为监管局_ms15_2_2_annex_6_22页_435kb

Summary of MS15/2.2: Annex 6 - Institutional Econometric Analysis

Core Content

This annex is part of the Asset Management Market Study and focuses on the institutional econometric analysis of how investment consultants' recommendations affect institutional net flows into and out of investment products. The study aims to assess whether these recommendations drive flows and whether they add value for institutional investors.

Main Viewpoints

• Fee Structure and Competition: Asset managers typically use ad valorem fees (a percentage of AUM), which incentivize them to compete for and retain institutional assets. While good performance can increase AUM and revenues, the fee structure does not directly tie compensation to performance, which may reduce the incentive to deliver superior returns.

• Role of Investment Consultants: Investment consultants are key intermediaries in the institutional asset management market, offering a range of services such as manager ratings, recommendations, and strategic asset allocation advice. They are often seen as gatekeepers for institutional investors, influencing which fund managers are selected.

• Recommendations and Flows: There is strong evidence that investment consultants' recommendations significantly drive institutional fund flows. The study found that an increase in the number of recommendations leads to substantial inflows of assets, while a decrease results in outflows.

• Added Value of Recommendations: Despite the significant impact on flows, there is limited evidence that these recommendations add value for institutional investors. The study suggests that recommendations may be influenced more by soft factors (e.g., brand awareness, reputation) than by past performance.

• Data and Methodology: The study uses two main data sources:

  • A ten-year history of investment products highly rated by six investment consultants.
  • eVestment data, which provides comprehensive information on institutional investment products, including returns, AUM, net flows, and benchmarks.

  The analysis employs flow-performance regression models to examine the relationship between consultants' recommendations and flows, while controlling for past performance, fees, volatility, and other product attributes.

• Recommendation Impact: The impact of recommendations on flows is lagged, with the effect becoming noticeable over several years. For example, an additional recommendation in year t-1 can lead to a USD460 million increase in assets or a 53% increase in total net assets. The effect of a recommendation change is also statistically and economically significant, with coefficients up to t-4 showing notable impacts.

• Limitations: The study notes that investment consultants do not publicly disclose their past ratings, making it difficult to assess their predictive ability. Also, product naming conventions vary, requiring manual matching between consultant data and eVestment data to ensure accuracy.

Key Information

Data Sources

• Consultant Ratings Data: Provided by six investment consultants, covering highly rated products over a ten-year period.
• eVestment Data: Contains information on institutional investment products, including:
  • Returns
  • Manager-specified benchmarks
  • Assets under management (AUM)
  • Net flows
  • Charges (only for 2015)

Variables and Regression Models

• Net Flows: Defined in two ways:

  • As the change in USD AUM adjusted for returns.
  • As the percentage change in AUM relative to the total net assets from three years prior.

• Regression Model:
  $$
  \text {Flow}{i,t} = \alpha{t} + \beta1 f(\text {ConsultantRec}{i,t-1 \text { to } t-5}) + \beta2 \text {Past Perf}{i,t-1} + \gamma \text {Controls}{i,t-1} + \varepsilon{i,t}
  $$
  This model includes:

  • Recommendation level (number of consultants recommending the product)
  • Change in recommendations (Chg in Rec)
  • Additions and deletions to the recommendation list (Add to Rec and Rem from Rec)
  • Past performance (Performance percentile rank and excess performance percentile rank)
  • Control variables such as fees, volatility, and AUM

Results

• Recommendations significantly influence flows, with positive coefficients indicating that more recommendations lead to more inflows.
• Recommendation changes (additions or deletions) have a substantial effect on AUM, with additions leading to large inflows and deletions causing significant outflows.
• The impact of recommendations is long-lived, with effects observable over up to four years.
• Performance does not strongly correlate with recommendations, suggesting that consultants may rely on non-performance factors when rating funds.
• The study does not assess the value of strategic asset allocation advice, as it is not directly linked to fund flows.

Conclusion

The econometric analysis suggests that investment consultants' recommendations play a significant role in driving institutional fund flows, but there is limited evidence that these recommendations add value in terms of performance. The study highlights the need for transparency and standardization in consultant ratings and the importance of further research to assess the true value of these recommendations for institutional investors.