Interviews with Institutional Investors: The How and Why of Active Investing

F. Douglas Foster*, Geoffrey J. Warren

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)


We interview professional institutional investors to learn how they choose between active and passive management, select active equity managers and construct multi-manager portfolios. We find that many of the aspects emphasized in the fund management literature, such as returns generated by the average manager and emphasis on past performance, play a relatively minor role in decisions. In contrast, judgment is found to play a central role, particularly the evaluation of people when selecting managers, the role of confidence in retaining managers, and self-perceptions about capability to identify skilled managers. Past performance is not taken at face value, but analyzed to understand underlying sources of returns. Stated reasons for preferring active management relate to whether a handful of skilled active managers can be identified and combined to generate a better expected portfolio outcome; and are only vaguely associated with the performance of the average manager.

Original languageEnglish
Pages (from-to)60-84
Number of pages25
JournalJournal of Behavioral Finance
Issue number1
Publication statusPublished - 2 Jan 2016
Externally publishedYes


  • Active investment management
  • Institutional investors
  • Manager selection
  • Portfolio construction
  • Qualitative methods


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