Assured Active Management

18 Pages Posted: 1 Mar 2013 Last revised: 3 Mar 2013

Date Written: July 31, 1995

Abstract

U.S. pension funds currently own about $1.3 trillion of domestic equities. About 30% of this is invested in index funds. Index funds deliver only the return of the index less a discount. A credible investment product that assures the return of a benchmark plus a premium is an attractive alternative to indexing. We analyze a knock-out call type investment performance fee arrangement that provides such a premium, eliminates counterparty risk, and significantly enhances risk management for investors. An important property of the fee structure is that it is only attractive to investment managers who believe they can outperform a chosen benchmark.

Keywords: active management, guarantee, investment

Suggested Citation

Ferguson, Robert and Berman, Dale, Assured Active Management (July 31, 1995). Available at SSRN: https://ssrn.com/abstract=2226488 or http://dx.doi.org/10.2139/ssrn.2226488

Robert Ferguson (Contact Author)

AnswersToGo ( email )

6815 Edgewater Drve
Apt 208
Coral Gables, FL FL 33133
United States
7868974573 (Phone)

Dale Berman

Consultant

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
15
Abstract Views
275
PlumX Metrics