SANTA MONICA, Calif., Nov. 24, 1998 (PRIMEZONE) -- Wilshire Associates Incorporated today introduced a new tool that allows plan sponsors to evaluate the relationship between the size of assets under management and the impact on return for a given investment manager. The tool, called "Asset Growth vs. Value-Added," has been incorporated into the Wilshire Compass, a software tool that helps investment executives determine asset allocation strategies, optimal manager allocations, and ideal managers for a specific asset class.
"A common concern among plan sponsors is whether higher levels of assets under management adversely impact a particular manager's ability to add value," said Hal Reynolds, Vice President, Wilshire Associates, a leader in investment management consulting and the development of portfolio analytical tools. "The Wilshire Compass now allows plan sponsors to look at this relationship and incorporate it into their decision-making process."
Reynolds said that asset class and investment style may determine whether the size of assets has a negative or positive impact on the alpha, or the risk-adjusted excess return above the benchmark.
"We might expect some reduction of return as assets under management increase within the small cap equity arena because managers are forced to choose between expanding the number of stocks in a portfolio or suffering the higher transaction costs associated with trading larger positions of illiquid stocks," said Reynolds. "In contrast, asset size may be beneficial in some fixed income markets because of reduced transaction costs and possible access to a wider set of fixed income investments."
The new tool compares the rolling alpha, which is derived using Wilshire's multi-factor attribution model with a three-year rolling average of the manager's assets under management.
In addition to producing the Wilshire 5000 Index, the best known broad market index consisting of all publicly traded US stocks, Wilshire advises on about $1 trillion in assets through its investment consulting, asset management and portfolio analytical services.