Asset Managers: Institutional Performance and Factor Exposures

Author: Joseph Gerakos, Juhani T. Linnainmaa, Adair Morse

Using data on $18 trillion of assets under management, we show that actively managed institutional accounts outperformed strategy benchmarks by 88 (44) basis points on a gross (net) basis during the period 2000–2012. Estimates from a Sharpe (1992) model imply that asset managers’ outperformance came from factor exposures. If institutions had instead implemented mean variance efficient portfolios using index and institutional mutual funds available during the sample period, they would not have earned higher Sharpe ratios. Our results are consistent with the average asset manager having skill, managers competing for institutional capital, and institutions engaging in costly search to identify skilled managers.

Gerakos, Joseph and Linnainmaa, Juhani T. and Morse, Adair, Asset Managers: Institutional Performance and Factor Exposures (November 9, 2019). Available at SSRN: or

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