A recent book titled “The Trust Mandate” by Herman Brodie and Klaus Harnack sheds light on this question through an in-depth analysis of investment manager selection by institutions and pension plan sponsors.
Citing comprehensive studies, surveys, and data from both U.K. and U.S. plan sponsors, Brodie and Harnack point out that while past performance is only modestly correlated with future performance, it is highly correlated with money flows to investment managers.
On the surface, that supports the notion that performance chasing is alive and well. However, asset flows do not all pile into the highest-performing fund or manager of the previous time period, and assets flow into many managers who actually had subpar prior performance. Therefore, other factors are definitely entering into the decision.