Can alignment of active manager and investor interests be improved?

Charles Jackson ()
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Charles Jackson: Jackson Partners, Cottisford, Brackley

Journal of Asset Management, 2013, vol. 14, issue 6, No 4, 376-384

Abstract: Abstract There is growing evidence that the interests of active managers and their investors are misaligned, as the average value added delivered to the latter by the former is less than zero after fees are deducted. Some commentators have concluded that it is impossible to correct this misalignment. This article argues both that much of this misalignment stems from diseconomies of scale in active manager value added and that this misalignment can be corrected when skill is present. It also presents a model that quantifies the trade-offs between the alignment improving measures it identifies.

Keywords: alignment of interest; active risk; diseconomies of scale; investment fees; manager skill; manager self-investment (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:14:y:2013:i:6:d:10.1057_jam.2013.26

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DOI: 10.1057/jam.2013.26

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