UK - Trustees are often selecting managers at the top of their performance cycle, according to WM Performance Services.

Speaking to IPE, Alastair MacDougall, head of research at WM, suggests pension funds may be appointing and sacking asset managers on the wrong side of a fund's performance and could be missing out on investment opportunities as a result.

"Trustees tend to buy managers after a period of good performance and sack them when they had a few years of underperformance which is very, very bad in terms of mis-timing manager performance cycles," he said.

MacDougall explained where managers have performed well in the recent years "it is quite a high likelihood that they actually won't maintain that performance in the period following when the trustees want to hire that manager."

At the same time, trustees have a tendency to sack managers "after a few years of bad performance but the manager might well turn that performance round", suggests MacDougall.

"I think, increasingly, trustees are aware of that problem. But it is very difficult for trustees to actually look at managers who have a very recent poor performance - when in actual fact it might be better doing that than hiring managers who have done particularly well over the recent past," MacDougall suggests.

His sentiments were echoed in a recent 'What if?' market review by consultants Watson Wyatt which warned managers should not be chosen judged on past performance but only on skills.

Edouard Stucki, senior investment consultant at Watson Wyatt, earlier this year questioned at the Fund Manager Selection 2007 conference in Zurich whether pension funds using performance as the key factor should view fund manager selection as a  "dog and pony show or beauty parade".