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Watson Wyatt cautions against 'reactionary' investment manager changes
Watson Wyatt Worldwide has cautioned against "reactionary like-for-like changes" of investment managers by superannuation funds, claiming poor past performance is not a "sufficient condition" for firing an investment manager.
Australia head of research Hugh Dougherty said a "firing is warranted" only when poor performance occurs alongside a loss of skill, a failure of risk control or when an investment manager's results produce negative changes to business or style.
Many superannuation funds are understandably concerned by the combination of exceptionally poor market performance and extreme positive and negative relative performance by investment managers, he said.
"In the extreme situation, where there has been poor market performance and relative performance, trustees and other fund managers are naturally biased to action, but we would caution against reactionary like-for-like changes of investment managers.
"While the interpretation of past performance is complex, it is essential to do this analysis before automatically concluding that a manager has done very poor work," Dougherty said.
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