Termination Risk and Asset Managers’ Risk Taking in Separately Managed Accounts

Lucia Spotorno Giacomo Nocera

No 26278, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: We study the risk-taking behavior of asset managers delegated by institutional investors through separately managed accounts, a setting in which mandate-retention concerns are particularly salient relative to compensation incentives. Using a hand-collected dataset of Italian occupational pension funds over the period 2003–2023, we find that managers adopt more conservative investment strategies when mandates are larger, when the same mandate is assigned to multiple competing managers, and as contracts approach expiration. These patterns are consistent with managers adjusting their behavior to preserve the mandate and reduce termination risk rather than to maximize current compensation. Our findings have implications for the design of delegated investment mandates and the incentive structures faced by professional asset managers.

Keywords: Separately managed accounts; Risk taking incentives; Termination risk; Compensation risk; Management turnover; Active management; Delegated asset management. (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Pages: 80
Date: 2026
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