EDINBURGH - There's no clear evidence that specialist European managers outperform balanced managers, according to a new study by The WM Co., Edinburgh.
The study also found that European specialist portfolios run on behalf of U.S. pension funds have performed worse than their counterparts for U.K. pension funds during the three years ended Dec. 31, 1994. In both cases, however, specialists failed to outperform balanced managers.
Comparing European (ex-U.K.) portfolios to the component of EAFE "balanced" briefs, WM found that a specialist portfolio managed for a U.S. pension fund underperformed by 1.3% a year.
For U.K.-based funds, a European specialist managed portfolio marginally underperformed the European component of a balanced brief by 0.1% a year. (U.K. balanced briefs include both domestic and overseas equity and fixed income.)
Both results, however, show improvements from WM's previous study, which covered the three years from 1990 through 1992.
In the new study, the U.K. portion of specialist European briefs managed for U.S. funds severely underperformed both the index and the components of EAFE mandates. During the recent three-year period, the specialist briefs underperformed the U.K. portion of EAFE mandates by 1.8% a year.
Specialist briefs managed for U.K. funds did better, outperforming the Financial Times-Actuaries index by 1.4% per year and the component of balanced portfolios by 1.3% a year.
The WM study speculated U.S.-based specialist portfolios are less diversified than their U.K. counterparts, and that higher turnover in U.S.-based specialist portfolios may have contributed to poorer returns.