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Asset ManagementA Systematic Approach to Factor Investing$
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Andrew Ang

Print publication date: 2014

Print ISBN-13: 9780199959327

Published to Oxford Scholarship Online: August 2014

DOI: 10.1093/acprof:oso/9780199959327.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 18 September 2021

Delegated Investing

Delegated Investing

(p.491) Chapter 15 Delegated Investing
Asset Management

Andrew Ang

Oxford University Press

What is best for the asset owner (principal) is usually not best for the delegated fund manager (agent). Principal–agent conflicts can be mitigated by appropriate governance structures and contracts. Poorly designed benchmarks cause agents to work against the asset owner’s goals. Effective boards can advocate for principals’ interests. Boards should build processes for investment decisions rather than making those decisions.

Keywords:   principal–agent, agency problem, optimal contract, Irrelevance Result, nonlinear contract, delegated portfolio management, adverse selection, moral hazard, factor benchmark, financial advisor, boards, investment decisions

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