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Asset Managers: Institutional Performance and Smart Betas

Author

Listed:
  • Joseph Gerakos
  • Juhani T. Linnainmaa
  • Adair Morse
Abstract
Using a dataset of $17 trillion of assets under management, we document that actively-managed institutional accounts outperformed strategy benchmarks by 86 (42) basis points gross (net) during 2000–2012. In return, asset managers collected $162 billion in fees per year for managing 29% of worldwide capital. Estimates from a Sharpe (1992) model imply that their outperformance comes from factor exposures ("smart beta"). If institutions had instead implemented mean-variance portfolios of institutional mutual funds, they would not have earned higher Sharpe ratios. Recent growth of the ETF market implies that asset managers are losing advantages held during our sample period.

Suggested Citation

  • Joseph Gerakos & Juhani T. Linnainmaa & Adair Morse, 2016. "Asset Managers: Institutional Performance and Smart Betas," NBER Working Papers 22982, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22982
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    References listed on IDEAS

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    3. Lerner, Josh & Mao, Jason & Schoar, Antoinette & Zhang, Nan R., 2022. "Investing outside the box: Evidence from alternative vehicles in private equity," Journal of Financial Economics, Elsevier, vol. 143(1), pages 359-380.

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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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