45 Pages Posted: 18 Mar 2017 Last revised: 8 Apr 2017
Date Written: April 7, 2017
We are the first to investigate specific size effects in separate accounts (SAs). This is important because SAs are a major investment vehicle for institutional investors and have a distinctive organizational structure compared to mutual funds. Thus, we contribute new insights into this economically important investment segment and into size effects in portfolio management in general. The main source of diseconomies of scale in SAs is an additional structural layer, i.e. separate, individualized accounts of single investors, which increases overall management complexity. To compensate for a high number of accounts, managers dramatically reduce the number of holdings. This reduction of portfolio complexity significantly hurts performance.
Keywords: Institutional investing, separate accounts, performance, diseconomies of scale, flows
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
Rohleder, Martin and Tentesch, Hendrik and Wilkens, Marco, On Size Effects in Separate Accounts (April 7, 2017). Available at SSRN: https://ssrn.com/abstract=2933546