Despite the size and importance of separately managed accounts (SMAs) and collective investment trusts, their characteristics and performance have not been studied in detail. We show that separate account performance is similar to that of index funds and superior to that of actively managed mutual funds. Management supplies a benchmark for each separate account. When the management-selected benchmark is used to measure performance, performance is significantly overstated. Despite this, investors react to differences in performance from the management-preferred benchmark in choosing among SMAs. Finally we find variables that explain both the cross section of alphas and the cross section of cash flows.

In this paper, the authors use monthly holdings to study timing ability. These data differ from holdings data used in previous studies in that the authors’ data have a higher frequency and include a full range of securities, not just traded equities. Using a one-index model, the authors find, as do two recent studies, that management appears to have positive and statistically significant timing ability. When a multiindex model is used, the authors show that timing decisions do not result in an increase in performance, whether timing is measured using conditional or unconditional sensitivities. The authors show that sector rotation decisions with respect to high-tech stocks are a major contribution to negative timing.

Edwin J. Elton, Martin J. Gruber, Christopher R. Blake; Common Factors in Active and Passive Portfolios, European Finance Review, Volume 3, Issue 1, 1 Janu

ABSTRACT This paper examines problems in the CRSP Survivor Bias Free U.S. Mutual Fund Database (CRSP, 1998) and compares returns contained in it to those in Morningstar. The CRSP database has an omission bias that has the same effects as survivorship bias. Although all mutual funds are listed in CRSP, return data is missing for many and the characteristics of these funds differ from the populations. The CRSP return data is biased upward and merger months are inaccurately recorded about half the time. Differences in returns in Morningstar and CRSP are a problem for older data and small funds.