Plan Sponsors Act Defensively in Making Investment Decisions

Plan Advisor – Newly published research finds that plan sponsors’ expectations of performance are driven by past performance, investment consultants’ recommendations, and soft factors which they identify in their asset managers, such as having a consistent investment philosophy, clear decisionmaking processes and capable investment professionals.

Researchers Howard Jones, from the Saïd Business School, University of Oxford, and Jose Martinez, from the University of Connecticut School of Business, say the partial dependency of expected performance on past performance and soft factors is not, in itself, irrational. Investors could use such variables as signals of future performance. However, what they did find irrational is that past performance is relied upon when it is uninformative about future performance, and the same was true for soft factors.


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