Abstract

http://ssrn.com/abstract=966255
 
 

References (30)



 
 

Citations (7)



 


 



Intermediated Investment Management


Neal Stoughton


Vienna University of Economics and Business Administration; Vienna Graduate School of Finance (VGSF)

Youchang Wu


University of Wisconsin - Madison - Department of Finance, Investment and Banking

Josef Zechner


Vienna University of Economics and Business

June 1, 2010

Journal of Finance, Vol. 66, No. 3, pp. 947-980, 2011
EFA 2007 Ljubljana Meetings Paper
AFA 2009 San Francisco Meetings Paper

Abstract:     
Intermediaries such as financial advisers serve as an interface between portfolio managers and investors. A large fraction of their compensation is often provided through kickbacks from the portfolio manager. We provide an explanation for the widespread use of intermediaries and kickbacks. Depending on the degree of investor sophistication, kickbacks are used either for price discrimination or aggressive marketing. We explore the effects of these arrangements on fund size, flows, performance and investor welfare. Kickbacks allow higher management fees to be charged, thereby lowering net returns. Competition among active portfolio managers reduces kickbacks and increases the independence of advisory services.

Number of Pages in PDF File: 47

Keywords: investment management, intermediation, investment adviser, kickback

JEL Classification: G20, G23, G28

Accepted Paper Series


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Date posted: March 25, 2008 ; Last revised: March 18, 2012

Suggested Citation

Stoughton, Neal and Wu, Youchang and Zechner, Josef, Intermediated Investment Management (June 1, 2010). Journal of Finance, Vol. 66, No. 3, pp. 947-980, 2011; EFA 2007 Ljubljana Meetings Paper; AFA 2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=966255

Contact Information

Neal M. Stoughton (Contact Author)
Vienna University of Economics and Business Administration ( email )
Austria
Vienna Graduate School of Finance (VGSF) ( email )
Austria
Youchang Wu
University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )
975 University Avenue
Madison, WI 53706
United States
Josef Zechner
Vienna University of Economics and Business ( email )
Heiligenstaedter Strasse 46
Vienna, Wien A-1019
Austria
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