Valuing Active Managers, Fees, and Fund Discounts

Posted: 23 Jul 2001

See all articles by Robert Ferguson

Robert Ferguson

Axiomatic Systems, Inc.

Dean Leistikow

Fordham University - Finance Area


We use risk-neutral valuation to value a portfolio and decompose the value into the components accruing to its stakeholders - service providers, portfolio managers, and the owners. The analysis incorporates managers' expected performance and contract-renewal issues. It provides a paradigm for valuing active portfolio management. A managed portfolio's economic value is shown to differ from its net asset value. The article provides a better foundation for computing fair closed-end fund discounts and a partial explanation of equilibrium in the markets for open- and closed-end mutual funds. The article implies that changes in closed-end fund discounts are the analog of open-end fund inflows. It also shows that closed-end fund discounts are relatively sensitive to small changes in anticipated fund performance.

Suggested Citation

Ferguson, Robert and Leistikow, Dean, Valuing Active Managers, Fees, and Fund Discounts. Financial Analysts Journal, Vol. 57, No. 3, May/June 2001. Available at SSRN:

Robert Ferguson (Contact Author)

Axiomatic Systems, Inc. ( email )

5151 Collins Avenue, Suite 552
Miami Beach, FL 33140
United States
305-866-7720 (Phone)

Dean Leistikow

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

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