Revealed Heuristics: Evidence from Investment Consultants’ Search Behavior

Using proprietary data from a major fund data provider, we analyze the screening activity of investment consultants (ICs). We find that ICs frequently shortlist funds using threshold screens clustered at $500MM for AUM, 0% for benchmark-adjusted return, and quartiles for return percentile rank screens. Funds just above the $500MM AUM threshold get 14%–18% more page views and 5–9 pp greater flows over the next year compared to similar funds just below the threshold. Our results are consistent with ICs using a two-stage consider-then-choose decision-making process and cognitive reference numbers in selecting screening thresholds. (JEL G41, G11, G14, G29) Received January 8, 2021; editorial decision September 3, 2021. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.