Snigaroff Economics Active Management JPM 2000

8/3/2019 Snigaroff Economics Active Management JPM 2000

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WINTER 2000 THE JOURNAL OF PORTFOLIO MANAGEMENT 1

The pension fund and institutional investment

purchasers of asset management services

frame the debate of active or passive man-

agement in philosophical terms, using such

phrases as I believe (or dont believe) in active man-

agement. Then they hedge their bets by deciding what

percentage of their funds should be passively managed.

Academicians debate market efficiency using language

like the semistrong-form of market efficiency hypoth-

esis, and produce research attesting to the general folly

of active management. Investment management firms

simply want the job of managing someones money. Of

course they believe in active management, or at least those

who arent cynics do.

A more formal approach to the way pension fund

buyers of asset management services think about the active

management market and the way they apply their think-

ing could not only help clients improve their operations,

but could also impact the market for those services.

SUPPLY, DEMAND, AND THE

ALPHA PRODUCTION POSSIBILITIES CURVE

For purposes of illustration, the supply of active

management is drawn in Exhibit 1 as relatively flat, or

elastic. Factor inputs to active management suppliers, such

as the salaries of investment professionals, systems, and

infrastructure, are net, fairly constant regardless of quan-

tity supplied. Such inputs may even fall with increased

output, resulting in a downward-sloping supply curve.

ROBERT G. SNIGAROFF is

chief investment officer of the San

Diego County Employees R etire-

ment Association in San Diego (CA

92101-2427).

The Economics of

Active ManagementPension fund management needs improvement.Robert G. Snigaroff


2/8

It is very difficult, however, for buyers to find and

to distinguish suppliers with talent from those without

it. Because of this, suppliers build distribution franchises

resulting in significant hurdles for new entrants. Gener-

ally, the firms that provide active management have high

margins after they are successful in attaining scale. Buy-ers of active management are willing to pay a premium

to firms that are able to add value, as they may employ

talented professionals or have a valuable intellectual or

operational franchise. Marginal costs for suppliers are rel-

atively low after fixed costs are met.

Whatever the shape of the supply curve, buyers

of active management create a demand curve for active

management that impacts the production of alpha. The

supply and demand curves represented in Exhibit 1 por-

tray a monopolistic competition. Buyers can influence

both the demand curve and the alpha production possibil-

ities curve in order to improve their prospects in actuallyproducing alpha.

The production of excess return, or alpha, can be

modeled as an alpha production possibilities curve (here-

after alpha curve), as shown in the bottom half of Exhibit

1. As the supply of active management rises, there is a

corresponding increase in the aggregate dollars of pro-

duced value; i.e., the dollar amount of value that is added

to buyers of active management increases with the

amount of assets employed to produce it. At point A,

the curve reaches its highest point; that is, the contin-

ued addition of active management supplied results in amaximum dollars of produced value. After point A, there

begins a reduction in produced value for buyers.

Transaction costs grow with supply. Although

transaction costs are outside the alpha curve (by defini-

tion, alpha is produced value after transaction costs), the

fact that they grow with trade size contributes to a value

decline. And of course the market, if its trading with

itself, cant beat itself.

Even if we allow that there is alpha available to

the entire universe of active management because of its

role as providers of liquidity to the market or because

of non-wealth-maximizing market participants, there isa maximum dollars of produced value. There is also a

unique alpha curve and maximum dollars of produced

value for each subset of active management buyers.

Ideally, the pension fund buyer subset, in theaggregate, would like to be positioned at point A onthe alpha curve. It may be, however, that these buyersare instead positioned at point O, oversupply. If pen-sion fund buyers are positioned on the alpha curve atpoint O, they are failing in their business efforts to pro-duce alpha they are, in fact, in the region of man-aged value reduction.

At point O, the demand curve intersects supplyat Q

2in Exhibit 1. If buyers of active management are

not as informed as sellers, then the demand curve would:

1) likely have a steeper slope; i.e., demand is inelastic,

and 2) be positioned farther out on the supply curve

(buyers buy too much active management).1 The demand

curve would look like D2

in Exhibit 1.

On the first point, the fact that the percentage of

pension fund assets managed actively and the fees sell-

ers charge buyers have both remained constant suggests

demand inelasticity.2 On the second point, uninformed

buyers would tend to overestimate the actual size of the

alpha curve and so overbuy.

Much research suggests an inability to add value

by the average supplierof active management, hinting at

oversupply, hence the intersection at Q2. Consistent with

this research is new work by Ambachtsheer, Capelle, and

Scheibelhut [1998] arguing that, on average, the pen-

sion fund buyers of active management are in fact reduc-

ing value for their pension fund stakeholders.

2 THE ECONOMICS OF ACTIVE MANAGEMENT WINTER 2000

EXHIBIT 1

SUPPLY OF ACTIVE MANAGEMENT

DollarsofProducedValue

D2

D1

S

A

ORegion of Managed Value

Reduction to Pension Funds

Q1

Quantity of Active Management Supplied

PriceofActiveManagement

Q2


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THE PRINCIPAL-AGENT ISSUE

Demand curve D2

is consistent with the presence

of a principal-agent problem for pension fund organi-

zations, where agents are not acting to meet the objec-

tives of principals (maximization of risk-adjustedreturns).3 In the pension fund context, the principals

include both the funds beneficiaries and the plan spon-

sor. The beneficiaries are principals as the fund exists to

make current, and future, payments to them in retire-

ment. The plan sponsor is a principal because it reaps

the benefit, and assumes the risk, of any asset-liability

mismatch. (Here we are considering the economic prin-

cipal-agent definition, and not the legal.)

Lakonishok, Shleifer, and Vishny [1992, pp. 374-375] posit an agency problem in pension fund man-agement, and suggest a possible source of the problem

as the desire of the treasurers office (i.e., pension fundmanagement) to look similar to other funds (reductionof maverick risk) and to retain its own empire. Theyeven suggest that employees in the treasurers office maybe frustrated stock pickers, or perhaps excessivelyrisk-averse and in need of a good story to explainpoor performance to their superiors inside the spon-sor organization.

Assignment of blame is, in fact, a cultural fea-

ture of pension funds. OBarr and Conley [1992]

observed the behavior of pension fund managements

and find culture to be a more important decision dr iver

than economics.To say that the pension fund communitys busi-

ness practices are a result of culture, though, is simply a

dead end. Ascertaining how funds obtained this culture

and whether it can be changed is what is important for

pension funds and the active managers they hire. For this,

we can apply economic reasoning.

Principal-agency issues can be addressed by pen-

sion fund organizations. Ambachtsheer, Capelle, and

Scheibelhut [1998], for example, argue that pension

funds with higher scores for optimal organizational lay-

ering and clarity of delegation have better performance.

In effect, what they are arguing is that agency issues can

be successfully addressed, and that the segment of the

pension fund community that has better business prac-

tices has in fact addressed them and so has grown its

particular alpha curve.

The entire pension fund community can, in fact,

grow its alpha curve with business practice improvements.

This is shown in Exhibit 2, where A2

is shifted upward

and to the right, allowing a corresponding shift in the

optimal demand curve to quantity Q3. This is the prefer-

able solution for suppliers of institutional active man-

agement. A move to Q 3, however, means that there is acorresponding erosion in someone elses alpha curve. The

game becomes, how we, the pension fund community,

can carve into the alpha curve of, say, the buyers of mutual

fund active management. Can we, the pension fund

community, use our economies of scale and infrastruc-

ture to our advantage?

In fact, we have already done so. For example,pension funds have succeeded in gaining tax exemp-tion. Tax exemption is more than avoidance of confis-cation of a portion of the alpha curve to pay taxes. Itallows the expansion of the alpha curve for market par-ticipants who can exploit their tax-exempt status throughthe consideration of additional alpha production strate-gies (e.g., higher turnover strategies, or dividend pref-erence strategies when income is subject to higher taxesthan capital gains).

Also, corporate pension funds and many public

funds enjoy a prudent investor standard with respect

to the building of their investment portfolios. Del Guer-


EXHIBIT 2

SHIFT IN CURVES FOR ACTIVE MANAGEMENT

DollarsofProducedValue

D3

1

S

A

Region of Managed ValueReduction to Pension Funds

Q1

Quantity of Active Management Supplied

PriceofActiveManagem

ent

Q3

A2


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cio [1996] has shown that market participants who are

held to another standard cause market segmentation dis-

tortions by tilting portfolios toward investments that fidu-

ciaries could defend as being prudent. (Del Guercio

looks at a prudent man standard where investment

vehicles are viewed as suitable only when viewed in iso-lation and not in a total portfolio context.)

Also, pension funds build transported alpha

portfolios using derivatives to give the alpha of one asset

class (presumably less efficient and with a higher expected

information ratio) to another. This last case does not

expand the alpha curve through preferential regulatory

treatment, but rather through an application of the pen-

sion funds infrastructure. Pension fund managers can sep-

arate the asset class return from the production of alpha,

and find the best sources for alpha production. This

exploitation of market segmentation is much more dif-

ficult for individuals.Creating strategies for alpha curve expansion is

desirable for the pension fund community (buyers and

sellers), but such strategies do not solve the principal-

agent problem.

THE PRODUCTION OF ALPHA

If alpha production is similar to any other prod-

uct the corporation (or public entity) might wish to pro-

duce, why do so many funds fail in its production? I believe

it is due to a principal-agent problem that pertains in many

pension funds and that has not been successfully

addressed. I dont believe the problem is empire-building

by fund managers; in fact, just the opposite.

Ambachtsheer, Capelle, and Scheibelhut [1998]

are on to something when they write about the impor-

tance of pension fund governance and layering and del-

egation. For example, there is a surprising lack of

resources devoted to the pension funds internal man-

agement. The top pension fund governing body (or the

board), which spends as much or more than 50 basis

points of aggregate fund assets in external asset man-

agement fees, rarely spends more than 2 basis points on

its own internal management. Fund managements, as a

result, are staffed by executives who are poorly com-

pensated, aspire to careers on the sell side of asset man-

agement, have short average tenure, are compensated

without regard to whether alpha is actually produced,

and are delegated very little authority.4

Boards often retain the authority to hire and fire

active management suppliers themselves (in almost every

case in the public pension fund arena). In other words,

the boards of institutional pension funds, which enjoy sig-

nificant economies of scale in retaining a professional man-

agement effort in order to produce alpha, not only do

not pay enough to attract top talent in order to succeed,

but also end up trying to produce the alpha themselves.If a board committee decides how to produce

alpha, it not only has to select superior asset manage-

ment products, but it also needs to address complex issues

that dont lend themselves to solution by what is usu-

ally a part- time committee composed of non-investment

professionals.5 The first is that asset management firms

usually have an economic incentive to grow beyond the

most effective trade size for their clients.

Second is the need for the optimization of alpha

production. That is, it is the overall fit of a particular prod-

uct or strategy within the aggregate portfolio that mat-

ters, not the effectiveness of the strategy in isolation.Third, research indicates that past performance

matters little in forecasting future performance, and past

performance is the very information that committees

heavily rely on to add or retain service providers (along

with a short presentation by the service provider).6

Fourth, a committee must wade through an

astounding number of investment offerings and under-

stand the strategy of product proliferation that asset man-

agement firms use to reduce their own business risk (not

necessarily with active management skill, but rather by

offering a range of products; see Ennis [1997]).

Finally, firms that should no longer be in busi-ness stay in business through their marketing by associ-

ation. (They exploit active management buyers lack of

knowledge, weak management structure, and personal

and political connections.)

Persson and Tabellini [1999] have something to

tell us about authority delegation. In the political world,

they find strong and robust support for the prediction

that the size of government is smaller under presiden-

tial regimes. This research provides an interesting corol-

lary for the pension fund community.

The authors find that a parliamentary government,

with its diffuse form of decision-making and account-

ability, increases politicians positive rents for themselves

(government is bigger and more expensive). This, they

contrast with governments with a presidential regime,

i.e., a regime with more authority and visible account-

ability that is associated with less government and expense.

The delegation of authority is also consistent with

the general change in the practices of U.S. business in



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recent years: the pushing down of authority to frontline

employees. Many pension funds (especially public

funds) are practicing a centralized business model that

fewer and fewer of the companies they invest in con-

tinue to practice.

Finally, the hypothesis that there is a pension fundprincipal-agent problem as opposed to sellers with

monopoly pricing power is evidenced by the structure

of the asset management industry. Active management

sellers do not have a monopoly; there is too much indus-

try diffusion and too much fluctuation in market share.

There are 392 active managers each managingmore than $1 billion in tax-exempt assets. Only six have2% or more of total market share, with the one man-ager maximum just over 4%. The Herfindahl index ofindustry concentration for all active managers is 120for 1998, nowhere near the 1,000 index level the Jus-

tice Department uses to define overconcentration. Con-trary to much current commentary, industryconcentration has actually decreased; the Herfindahlindex was at 132 in 1989.7

Even so, suppliers demonstrate pricing power.

They have adopted what Ennis [1997] describes as an

adaptive strategy of product proliferation resulting in

less well-informed buyers paying the same levels of active

management fees to a revolving set of suppliers. Sellers

are adapting to the market in active management. Buy-

ers are not.

Path-Dependence

Given that a principal-agent problem exists, how

did the pension fund community get to where it is? One

reason is that the asset management firms, the consul-

tants, and other service providers are provided incentives

to help boards focus on whats not important. Service

providers simply want to sell a service, and to make the

sale they need to show their wares. They therefore sup-

ply inordinate amounts of information testifying to their

skill. They also spend significant resources in marketing

by association to the buyers of the services. Simply by

providing the enormous amount of information, and by

marketing, sellers move the focus from the pension plan

balance sheet and total fund managed value-added to

investments and investment providers.

Buyers of active management, if they are the

board, spend a great deal of time on the evaluation of

active management service providers, instead of evalu-

ating the overall (and far more important) pension fund

balance sheet issues. The tendency of the active man-

agement buyers to be dazzled by the mystique of the

market and the money masters is reinforced by sell-

ers trying to make a sale.

This view only moves the question back one step

without explaining how the pension fund active man-

agement industry arrived at its current condition. Forthis, we need a brief dose of history.

Through the 1970s the asset management indus-

try looked different; bank trust departments dominated

the management of pension fund assets. Before the mid-

70s, all assets were actively managed. Pension fund assets

grew dramatically through the 1980s and 1990s. Dur-

ing the 1980s banks failed to reconcile the need for high-

quality professionals and their compensation schemes (a

problem related to the current pension fund dilemma of

quality management and inadequate compensation). They

then lost their most important asset, skillful profession-

als. The stand-alone asset management firms were formedin great numbers after these professionals recognized that

they could capture the high margins associated with asset

management themselves; talent is, after all, beneficial to

asset management buyers.

Two general trends are occurring in asset man-agement today. The first is that some asset managementfirms are cashing out: selling their businesses back tobanks or other large institutions that want an equity stakein the business and that have enough capital to continuethe expensive marketing of products. The second is rapidproduct proliferation by which suppliers hope to have

a reasonable chance at offering benchmark-beating prod-ucts. As the level of complexity in the institutional fundsmanagement market has grown, so too has the com-plexity of investment vehicles and strategies that pen-sion funds use to try to succeed in alpha production.Organizational design within pension funds, however,remains as before.

During the 1970s, an external entity (the bank

trust department) chosen by the board had oversight over

the pension funds entire pool of assets. Now, in the banks

stead, the board of the pension fund very often assumes

oversight of the aggregate fund, and as it selected the bank

trust departments, it still often chooses to select the asset

management service providers. Following enactment of

the Employee Retirement Income Security Act and grad-

ual acceptance of portfolio theory, boards now have a

far more complex task: building a portfolio with port-

folio theory and a slew of specialized active managers.

Frequently a board brings in a consultant to offer sup-

port. The board often accepts the advice of the increas-



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ingly product-focused active management sellers, some-

times preferring it to their own managements.8

Both at corporate and public pension funds,

boards tend to neglect planning for and evaluation of

management and infrastructure in order to produce alpha.

For example, the career track for a corporate pension fundinvestment professional is often a return to the corpo-

rate treasury department.9 At public funds, managers are

not given much authority, and they administer board

directives as opposed to initiating their own. Often man-

agers are merely an additional screen for active man-

agement suppliers to overcome in selling their product

to the board.

Boards arent conscious rent-seekers, as there is

relatively little rent, or self-benefit, in the continuation

of their current business practices. They simply arent

offered a better way of practicing business by the indus-

try that offers them products. Pension fund industry struc-ture is thus path-dependent, a result of its particular

history that locks the industry into inefficiency.

Changing the Path

Both corporate fund and public fund governingbodies need to make improvements if they want to: 1)create value for their stakeholders, 2) keep plan spon-sors from forcing change, and 3) avoid possible legisla-tive action concerning their business practices. Sooneror later, plan sponsors and beneficiaries will begin torealize the success, or lack of success, of their pension

fund efforts to produce alpha. Likely, the realization willcome from the plan sponsor, as the beneficiaries are, inthe parlance of public choice economics, rationallyignorant.10

In 1985, the Financial Accounting StandardsBoard issued FAS 87, which requires that unfundedpension liabilities be moved to the balance sheet. Ide-ally, this increases the visibility of the pension fundto the corporate plan sponsor, but on the down side,FAS 87s reliance on defensible asset return assump-tions allows corporate funds to use historical returns,which have been high recently. Generally, expectedfuture returns are not discounted to compensate. Cor-porate funds can, in fact, thus double-count assetreturn assumptions.

Many pension fund active management buyers

show a desire to evaluate their alpha production busi-

nesses. A significant number accept Ambachtsheers con-

tributions to pension fund governance, including

participation in the cost effectiveness management sur-

vey and use of the risk-adjusted net value-added, or

R ANVA, performance metrics, which is the pension

fund equivalent of the corporate economic value-added

measurement.11 Some use the information ratio perfor-

mance measurement for evaluation of actual returns as

compared to their policy returns.The active management industry is capable of

material change. Think about the change in the bro-

kerage industry after the deregulation of commissions

in 1975. Since 1975, average institutional commissions

for listed shares have dropped by as much as 80%, as

asset management firms in both the pension and mutual

fund active management segments have demanded

unbundled (from research) commissions at lower cost.

What helped foster this change was an economic align-

ment that properly motivated agents to act in the best

interests of their principals; reduced commissions result

in an improved active management product to gain orretain market share.

Pension funds would benefit similarly from an

improved principal-agent relationship in order to

advance alpha production activities. Specifically, boards

need to delegate responsibility to management, build suit-

able infrastructure, align compensation of management

to recognize success in attaining their goals, and make

management accountable for results. Finally, boards need

to design their organizational structures so that man-

agement becomes the primary voice in the formulation

of business strategy. For suggestions on how boards can

improve their overall oversight of pension funds, I rec-ommend Ambachtsheer and Ezra [1998].

Given a desire for individual pension plans to

attempt to produce alpha, there is a tendency for the pen-

sion fund community in the aggregate to slide down the

alpha curve from point A toward point O in Exhibit 1.

Widespread adoption of performance-based fees paid to

asset management firms could alleviate this problem. Pen-

sion funds would need to manage the moral hazard of

giving asset management firms and the managers of the

pension funds an asymmetrical bonus payment, as pre-

sumably neither would accept a penalty if they were to

underperform. For this, pension funds need to adopt

well-designed risk audit programs.

SUMMARY

Active asset management is a zero-sum game.

Buyers who want to produce alpha in a zero-sum game

have to be better than their competition. For pension



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funds, competition includes all other participants in active

management, including mutual funds, individual

investors, endowments, bank trust departments, institu-

tional funds trading for their own accounts, hedge funds,

and even each other. Pension funds do not now plan their

alpha production efforts using strategies to exploit theircompetitive advantages. In fact, the pension fund com-

munity has a principal-agent problem that makes it dif-

ficult to even see whether the fund is successful in

producing alpha, and the design and execution of alpha

production efforts suffers.

The structure of the industry and the nature of

the product contribute to the tendency for pension fund

boards to be dazzled by investment advisors rather than

conscious of management accountability and business

issues. R esearch suggests the magnitude of the problem

and confirms a need for improvement.

Pension funds do not have to accept theinevitability of the culture. They can successfully

address principal-agent issues. Some of them have, and

the active management industry will adjust.

ENDNOTES

1See, for example, Ambachtsheer [1998].2Cost effectiveness measurement data show the U.S.

pension fund average percentage of assets externally actively

managed is at 63.1% in 1997 versus 65.1% for 1994 and that

direct investment management costs are at 29.1 and 29.6

basis points for 1997 and 1994, respectively. Suppliers arealso able, with their segmented fee structures, to practice

multistage price discrimination to use the normative term

favored by economists. Different prices for buyers with dif-

ferent demand can benefit buyers with more elastic

demand and so reduce their prices. The offering of discounts

to the largest buyers increases trade size, however, and can

erode the ability to produce alpha for all clients (but not

supplier revenues). For discussion of incentives for firms to

grow beyond the optimum size for their clients, see Perold

and Salomon [1991].3We could look at other objectives, but our focus is

on pension fund alpha production.455% of corporate and 47% of public fund executives

next career choice is work in consulting or at an investment

management firm (according to 1993 Survey of Plan Spon-

sor Backgrounds, Responsibilities and Career Plans, p. 16).

These numbers are likely understated as they include some

non-investment survey respondents who presumably have

career aspirations other than consulting or with investment

management suppliers.

The 1993 Plan Sponsor Compensation Survey, p.

11, reports for public funds an 8.6% participation rate in

bonuses with a 7% mean bonus yielding a 60 basis point aver-

age bonus. For corporate funds 73% of fund executives par-

ticipate in bonuses, but for only 27% is the bonus linked to

fund performance.5In corporate pension plans, boards are often made

up of senior corporate treasury personnel whose expertise

is corporate finance. In public plans, boards often include

political appointees and representatives of current and future

beneficiaries.6See, for example, Kahn and Rudd [1995].7Index calculated using data as reported in Pensions &

Investments(May 17, 1999). Data are for tax-exempt asset man-

agement firms market share for all active management firms.

The Herfindahl index is: H = S21

+ S22

+ S23

+ + S2n

, where

Sn

equals the percentage share of the n-th firm in the mar-

ket. See Gwartney, Stroup, and Studenmund [1995, p. 615].

In the market share for just top ten and top one hundred firmswe see slight decreasing percentages of the total active man-

agement market.8Consultants generally are capable firms that can offer

sound advice, but they come with their own principal-agency

burdens: the selling of research and advice both to pension

plans and money managers, directed brokerage, and so on.

The best business design calls for an accountable management

as opposed to a joint management-consultant effort report-

ing to the board. Pension fund boards could consider out-

sourcing all their alpha production efforts to an outside service

provider. This would be desirable for the funds that have dif-

ficulty meeting market compensation rates for management

or for small funds that want to produce alpha but have dis-economies of scale.

9The 1993 Survey of Plan Sponsor Backgrounds

reports 48.8% of corporate plan sponsor respondents fore-

see remaining at their current job between one and five more

years (p. 29).10Beneficiaries are most interested in the level of their

benefits, and the cost of monitoring the efforts of the pen-

sion fund is not worth the effort. Even if the pension fund

fails in its alpha production efforts, the reduction in its funded

ratio happens slowly over time, and is not material for a sin-

gle beneficiary. Some pension funds have constituent retiree

groups that have organized themselves and monitor pension

fund activities. This type of activity will likely increase with

improved communication via the Internet. Still, its the plan

sponsor that is on the hook for any asset shortfall.11Ambachtsheer and Ezra [1998] define two pension

fund R ANVAs: a policy and an implementation R ANVA.

The implementation RANVA measurement would be appli-

cable to a funds ability to create value above its policy bench-

mark, and would be the appropriate measure for evaluation

of alpha production.



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30, 1998.

Ambachtsheer, Keith P., R onald Capelle, and Tom Scheibel-

hut. Improving Pension Fund Performance. Financial Ana-

lysts Journal, November-December 1998, pp. 15-21.

Ambachtsheer, Keith P., and D. Don Ezra. Pension Fund Excel-

lence: Creating Value for Stockholders. New York: John Wiley

& Sons, Inc., 1998.

Del Guercio, Diane. The Distorting Effect of the Prudent-

Man Laws on Institutional Equity Investments. Journal of

Financial Economics, 40 (1996), pp. 31-62.

Ennis, R ichard M. The Structure of the Investment-Man-agement Industry: R evisiting the New Paradigm. Financial

A nalysts Journal, July-August 1997, pp. 6-13.

Gwartney, James D., R ichard L. Stroup, and A.H. Studen-

mund.Economics: Private and Public Choice. Orlando: The Dry-

den Press, 1995.

Kahn, R onald, and Andrew R udd. Does Historical Perfor-

mance Predict Future Performance? Barra Newsletter, Spring

1995, pp. 1-20.

Lakonishok, Josef, Andrei Shleifer, and R obert Vishny. The

Structure and Performance of the Money Management Indus-

try. Brookings Papers in Microeconomics, 1992, pp. 339-391.

1993 Plan Sponsor Compensation Survey. Callan Associ-

ates Investments Institute, 1993.

1993 Survey of Plan Sponsor Backgrounds, R esponsibilities

and Career Plans. Callan Associates Investments Institute, 1993.

OBarr, William M., and John M. Conley. Managing R ela-

tionships: The Culture of Institutional Investing. Financial

A nalysts Journal, September-October 1992, pp. 187-193.

Perold, Andr F., and R obert S. Salomon, Jr. The R ightAmount of Assets Under Management. Financial Analysts Jour-

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Persson, Torsten, and Guido Tabellini. The Size and Scope

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