Institutional asset managers: industry trends, incentives and implications for market efficiency
BIS Quarterly Review, 2003
In recent years, investors have increasingly delegated the management of their investment portfolios to institutional asset managers. The scale of such delegated investing and its development over time are apparent from the growth in the size of assets under management by different types of institutional investors across various countries (Graph 1). Moreover, demographic trends can be expected to sustain the industry’s growth well into the future. The distinguishing characteristic of the industry is that asset management activities involve a series of delegated processes, linking the “triangle” formed by invested funds, fund owners and fund managers. As a result, contractual structures that seek to align the incentives of fund owners with the incentives of those charged with the management of these funds are an integral part of the business – and are bound to change as the industry continues to evolve.
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