How Investment Management Fees Hurt Investors

1997 ◽  
Author(s):  
Robert Ferguson ◽  
Dean Leistikow
Keyword(s):  
Investment Management ◽  
Management Fees

Pricing three cases of performance fees using options methodology

2019 ◽  
Vol 46 (1) ◽  
pp. 56-71
Author(s):  
Tom Messmore ◽  
Travis L. Jones
Keyword(s):  
Value Added ◽  
Options Pricing ◽  
Portfolio Performance ◽  
Investment Management ◽  
Fair Price ◽  
Content Type ◽  
Management Fees ◽  
Fee Structure ◽  
Performance Fees ◽  
Investment Manager

Purpose Prior research has demonstrated that investment management performance fees have the characteristic of a call option. It is important to examine whether these performance fees are consistent with traditional fee structures used by investment managers. It is also worth examining whether clients or managers benefit significantly more than the other party under performance fee structures. The paper aims to discuss these issues. Design/methodology/approach The authors use Black-Scholes options pricing methodology to examine three cases of performance fee structures. The Absolute Hurdle case examines the fee structure where the manager receives a portion of the return over a pre-defined absolute rate of return. The Benchmark Relative Hurdle case shows a fee structure based on performance in excess of the return of a benchmark portfolio. The Breakeven Relative Hurdle case illustrates the fee structure where there is revenue neutrality with the classic management fees when portfolio performance matches the benchmark. Findings The findings of this paper illustrate that a particular performance fee structure can be designed to have the same revenue as a traditional investment management fee structure. Such a structure is equally beneficial to both the investment manager and to the client and should have salutary motivational effects to improve investment results, while simultaneously rewarding the manager for value added at a fair price for both the manager and the investor. Originality/value This study is unique in that it examines three cases of performance fees and provides a comparison between performance fee structures and traditional investment management fee structures. The findings will assist investment portfolio managers in better setting management fees they charge clients. In addition, this study help with clients who feel they are being charged excessive management fees by their investment manager.

Investment management fees and determinants of pricing structure in the industry

1991 ◽  
Vol 17 (2) ◽  
pp. 74-79 ◽  
Author(s):  
Philip Halpern ◽  
Isabelle I. Fowler
Keyword(s):  
Investment Management ◽  
Management Fees

Active Versus Passive Investment Management Of State Pension Plans: Implications For Personal Finance

2015 ◽  
Vol 26 (2) ◽  
pp. 160-171 ◽  
Author(s):  
Michael L. Walden
Keyword(s):  
Management Strategies ◽  
Pension Plan ◽  
Pension Plans ◽  
Investment Management ◽  
Management Fees ◽  
Long Run ◽  
State Pension ◽  
Managed Portfolios ◽  
Plan Management ◽  
Pension Payments

There are 19 million workers and retirees and $3 trillion of assets in state pension plans. However, questions have arisen about the long-run ability of the plans to pay promised benefits to retirees. Consequently, proposals have been made to reduce promised pension payments or alter other terms of the pension contracts. Yet another heretofore unexplored alternative is to reduce state pension plan management fees by moving from actively managed portfolios to low-fee passively managed accounts. Using state pension plan data for the 2003-2012 decade and returns from three alternative low fee portfolios, it is found that all states could have increased after-fee earnings and improved their long-run ability to pay retirees by moving to the low-fee investment accounts. While clearly relevant for workers and retirees in state pension plans, the findings also have implications for all investors regarding the ongoing debate between active and passive investment management strategies.

SAVINGS INCENTIVES AND INVESTMENT MANAGEMENT FEES: A STUDY OF THE 529 COLLEGE SAVINGS PLAN MARKET

2014 ◽  
Vol 32 (4) ◽  
pp. 826-842 ◽  
Author(s):  
VICKI L. BOGAN
Keyword(s):  
Investment Management ◽  
Management Fees ◽  
College Savings

Investment Management Fees Are (Much) Higher Than You Think

2012 ◽  
Vol 68 (3) ◽  
pp. 4-6 ◽  
Author(s):  
Charles D. Ellis
Keyword(s):  
Investment Management ◽  
Management Fees

Practical Quantitative Investment Management with Derivatives

2002 ◽  
Author(s):  
Frances Cowell
Keyword(s):  
Investment Management

DECISION-MAKING ON INVESTMENT OF IT-INNOVATION BASED ON FUZZY EXPERT INFORMATION

2018 ◽  
pp. 103-111
Author(s):  
Olga Olegovna Eremenko ◽  
Lyubov Borisovna Aminul ◽  
Elena Vitalievna Chertina
Keyword(s):  
Decision Making ◽  
Individual Characteristics ◽  
Production Model ◽  
Investment Management ◽  
It Projects ◽  
Product Model ◽  
Project Cost ◽  
Reasoning System ◽  
Managerial Decisions ◽  
The Individual

The subject of the research is the process of making managerial decisions for innovative IT projects investing. The paper focuses on the new approach to decision making on investing innovative IT projects using expert survey in a fuzzy reasoning system. As input information, expert estimates of projects have been aggregated into six indicators having a linguistic description of the individual characteristics of the project type "high", "medium", and "low". The task of decision making investing has been formalized and the term-set of the output variable Des has been defined: to invest 50-75% of the project cost; to invest 20-50% of the project cost; to invest 10-20% of the project cost; to send the project for revision; to turn down investing project. The fuzzy product model of making investment management decisions has been developed; it adequately describes the process of investment management. The expediency of using constructed production model on a practical example is shown.

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