Upcoming Webinars

A Unified Theory of Delegated Capital Management

Jonathan Berk and Peter DeMarzo

presented by Peter DeMarzo

March 12, 2026
Seminar: 12:00 pm - 1:00 pm ET (9am PT, 4pm GMT, 5pm CET).
Virtual Coffee Break: 1:00 pm - 1:30 pm ET
Please note that the US with be on Daylight Savings Time, but Europe will not yet be on Summer Time.

Abstract: We develop a unified theory of delegated capital management by extending the paradigm of Berk and Green (2004) from mutual funds to alternative assets. With competitive markets and rational investors, we derive the optimal contract and account for observed regularities --- performance fees, persistent alpha, and limits on capital. The key distinction between mutual funds and alternatives is the liquidity of the underlying assets. When assets are illiquid, it is optimal to acquire information about the manager's skill. A positive alpha is therefore necessary to compensate informed investors and a performance based contract is required to induce these investors to allocate their capital optimally. At the same time, a free-rider problem emerges that requires capital constraints on uninformed investors. Thus, liquidity of the underlying assets explains the contrasting contract structures across sectors.