Performance Persistence Among Canadian Institutional Money Managers

Using the Mercer database of Canadian institutional money managers we test for performance persistence in several different large-cap equity mandates. From 1990 to 2008 we find that top-performing funds over the prior four years have no better chance of staying in the top half than of falling into the bottom half of their peers over the next four years. Our finding of no performance persistence is limited to the high-performing funds because low-performing funds exhibit some persistence and also markedly higher attrition rates. Our findings are robust to three- and five-year performance-measurement periods and to risk-adjustment. We also find short-term persistence across managers, which is probably a manifestation of the momentum effect in securities.