Abstract
We investigate efficient fee structures for actively managed funds when both the investor-principal and the prospective manager-agent have utility functions of the generalized log variety. Efficient fees include a fixed component that reflects the manager’s protected consumption. This is a new rationale for a flat component of fees analogous to fee-for-service. Also new is our result that participation is not all or nothing. Specifically, the amount placed with the active manager is equal to the investor’s wealth less the present value of the total protected consumption of the investor and the manager. Efficient fees also include variable components reflecting total assets under management and performance relative to a passive benchmark.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
