Magazine article American Banker

Institutional Investors Find It Tough to Outperform Stock Market

Magazine article American Banker

Institutional Investors Find It Tough to Outperform Stock Market

Article excerpt

NEW YORK -- The stock market in the first quarter of this year continued to prove difficult to outperform.

Almost one-half of the institutional investors failed to beat the popular market proxies, according to several surveys. And, according to Computer Directions Advisors in Silver Spring, MD., several prominent investment firms underperformed the averages.

CDA calculates the performance of equity accounts managed by almost 300 counseling firms. It takes the reports that these firms file with the Securities and Exchange Commission each quarter and "freezes" the portfolio from the end of one quarter to the end of the following one. It then computes the return of the stocks. Any cash holdings are ignored, and the firm also does not compute trading that occurred during the quarter. The firm claims that such omissions actually have little effect in almost all cases.

Among the investment firms that have successfully attracted clients over the last few years but failed to beat the market during the first quarter were Sanford C. Bernstein & Co. of New York; Hellman, Jordan Management Co. in Boston; Trustee & Investors Co. in Boston, and Jennison Associates Capital Corp. in New York.

Other firms that failed to beat the market during the first three months of this year were L.F. Rothschild, Unterberg, Towbin in New York; Atalanta Capital Management in New York; BMI Capital Management in New York; Century Capital Management in New York, and Miller, Anderson & Sherrerd in Bala-Cynwyd, Pa.

On the other hand, the best performing equity manager according to CDA was a firm that attracted hundreds of millions of dollars after correctly calling the bear market of 1973-1974 but then underperformed the averages for almost the next decade. National Investment Services of America, Milwaukee, lost dozens of its clients in the early 1980s as corporations tired of the relatively poor performance. …

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