Fees at Risk

Hull (2007) writes: “For an asset manager the greatest risk is operational risk”. In 2008, however, asset management companies came under severe pressure not from operational risk, but from market risk.

Author(s):

Bernhard Scherer

Professor of Finance, EDHEC Business School

What had been seen as an annuity stream that was thought to expose firms to little or no earnings risk turned out to be directional stock market exposure combined with high operational leverage. Asset management companies, however, should hedge the risks of large swings in their P&L due to changes in asset-based fees in accordance with well established risk management principles. While alpha risks are regarded as core risks (it is the business of an asset management company to exploit these risks in return for fees), beta risks arising from client benchmark exposure are incidental. We suggest both the hedging of production risk (fees at risk) and capital market related business risk (redemptions by clients either to shed risk or to raise cash).

Type: Working paper
Date: le 01/12/2008
Research Cluster : Finance

See Also

THE FIGHT AGAINST SEXUAL AND GENDER-BASED VIOLENCE, A CORE COMPONENT OF THE START TO THE ACADEMIC YEAR FOR PRE-MASTER STUDENTS
News
- 20-09-2022
As part of the programme organised at the start of the academic year for EDHEC Business...
The EDHEC Global MBA ranked 14th in Europe in the Bloomberg Best B-School 2022-23 list
News
- 19-09-2022
The EDHEC Global MBA has been featured once again in the prestigious Bloomberg...
The new EDHEC PhD in Finance cohort ready to embrace challenges of doctoral studies
News
- 16-09-2022
A new cohort of 12 PhD executive  track participants and 2 residential track...
Green finance sector initiative for decarbonization: new paper out by Irene Monasterolo with The World Bank
News
- 15-09-2022
  Does greening the financial sector have real world impact? Green financial sector...