A widespread concern in the investment industry is whether commonly used investment management fee arrangements encourage investment managers to act in their clients' interests. The value to managers of a one-period call performance fee is maximized by maximizing performance volatility. This is...

Fiduciary capitalists, such as leading pension plans and endowments, can be influential in aligning the interests of asset management firms with their clients. In the market connecting investment professionals with the information they need to meet client goals, we identify numerous conflicts of...

The impact of liquidity-motivated institutional trading on firms' real decisions is not confined to periods of financial crises. Firms subject to mutual fund flow-driven selling pressure reduce share issuance and investment, whereas firms experiencing buying pressure do not increase investment,...

We present a framework for deciding when to choose an alternative to passively investing in capitalization-weighted indices within any particular asset class. Five reasons are identified for seeking an alternative. Three of these reflect situations where a capitalization-weighted index is either...

This piece contends that the way mutual funds are typically organized incentivizes fund managers to put their own interests ahead of fund shareholders. It goes on to argue that the legal regime in place to protect investors from such abuse is flawed, and that the late trading and market timing...