Superior information and compensation fees of active mutual funds

Chekib Ezzili () and Patrice Poncet ()
Additional contact information
Chekib Ezzili: Equity Derivatives, NATIXIS
Patrice Poncet: ESSEC Business School, Postal: Avenue Bernard Hirsch, BP 50105, 95021 Cergy Pontoise cedex, http://ssrn.com/author=201974

Journal of Financial Perspectives, 2013, vol. 1, issue 3, 143-154

Abstract: We posit a fund manager and an individual investor who maximize the expected (log) utility of their respective terminal wealth. The manager possesses more information than the investor does and charges the latter, their would-be customer, a linear compensation fee. The investor will delegate their portfolio decisions to the manager if, and only if, the expected utility of their wealth after fees is larger than the expected utility they can achieve by directly investing in the market. Our framework, which uses a mathematical result by [Amendinger (2000)], allows us to characterize compensation fees in terms of information differential.

Keywords: Compensation fees; Portfolio delegation; asset allocation; alpha; filtration enlargement. (search for similar items in EconPapers)
JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:jofipe:0030

Access Statistics for this article

Journal of Financial Perspectives is currently edited by Ms Alina Stefan

More articles in Journal of Financial Perspectives from EY Global FS Institute 1 More London Place, London SE1 2AF, UK.
Bibliographic data for series maintained by Ms Alina Stefan ( this e-mail address is bad, please contact ).