To determine whether the investment decisions of institutional plan sponsors contribute to their asset values, this study used a dataset of 80,000 yearly observations of institutional investmentnstitutional plan sponsors are responsible for pension plans, endowments, foundations, and other large pools of assets. These assets are huge (estimated to be more than $10 trillion in December 2006), yet the research on institutional investors is limited. Heisler, Knittel, Neumann, and Stewart (2007) documented the importance of historical performance measures, performance trends, and product attributes in shaping plan sponsors' decisions to allocate assets among professional money managers' investment products. Del Guercio and Tkac (2002) and Lakonishok, Shleifer, and Vishny (1992) also studied the institutional investment decision-making process. The question remains, however, whether these decisions add value for the ultimate beneficiaries or stakeholders on whose behalf the plan sponsors act. This question is important because of the size of institutional plans and their sponsors' sophistication relative to that of individual investors. Pension plans, endowments, and foundations are typically staffed with professionals who have advanced degrees and years of experience. Working on their own or with the aid of consultants, institutional sponsors devote considerable time and resources to selecting asset classes and products that are expected to perform well.The central goals of our study were to assess the success of these efforts by exploring the economic significance of allocation decisions and to attribute performance components to product selection, asset class, or style category allocation decisions. Although we did not observe the plans' performance directly, we did observe the allocation of their assets to investment products over time. The data we used are available in the PSN database, which includes 80,000 institutional product observations whose data include annual returns, annual assets, and accounts for 19842007. Heisler et al. (2007) determined that long-term total returns and a track record of consistently positive or negative benchmark-relative returns factor heavily into institutional plan sponsors' decisions to allocate assets to, or pull them from, equity products. They showed that sizable negative short-term total returns play a modest but statistically significant role in decisions to shift assets away from Literature Survey
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