This may have to be a regular feature here, passing on yet another story that confirms something we all knew already. This time it has to do with investment consultants, who gather millions of dollars in fees from pension funds and the like for steering their money this way or that. If I suggested that they earn those fees, would you believe me? No? Well, good for you.
Andrew Ross Sorkin, who sometimes does good work at the Times, reports on a study from the University of Oxford:
The study demonstrates, perhaps for the first time, that the investment consultants that pension funds rely on to advise them about what funds and investments they should make — resulting in tens of millions of dollars in fees each year — are, as one of the authors of the survey says, “worthless.”
via New York Times
I was in shock when I read this article. Was this truly the first time this obvious proposition had been proven?
Well, this may be explained by something else Sorkin relates: the fact that these consultants (fear anyone with that title, by the way) refuse to reveal how well they perform. Sort of like a baseball player keeping his batting average a secret. See if you can even understand this explanation from one of the consulting companies about why it's best if its clients don't know if it knows what it's doing:
“It’s in our clients’ interest to have the level of transparency that we have. We’re not forced by marketing purposes to give advice we think isn’t the best due to polishing numbers that makes us look better in a survey,” Mr. Kirton said. “You can make yourself potentially a hostage to data.”
I've read it a bunch of times, and I've finally concluded that he's saying that if they pretended to be transparent they'd have to lie to their clients (“polishing numbers”), but if they simply hide their incompetence behind a veil of secrecy they don't have to learn the art of mendacity. I suppose there's some virtue in that.
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