【Abstract】A basic question in finance is how to explain the structure of the investment management industry. To provide some insight into this problem, we present a closed-form solution to an optimal portfolio problem with quadratic costs where an investor has multiple managers choosing a portfolio on behalf of the investor. Each manager has unique private information, which he alone can use in choosing the portfolio. Unlike most of the delegated investment literature, we allow for multiple managers, and for the investor to also choose a portfolio alongside the managers. The solution is tractable, intuitive, and similar in form to the standard mean-variance efficient portfolio. We apply our solution to a situation where one manager is a passive, low-cost fund; we show that the optimal portfolio is for each manager to specialize by offering a portfolio that uses only their private information.

【Bio】Ronaldo Carpio received his PhD in economics from the University of California, Davis in 2012 and has been at UIBE since 2013. His research is forthcoming in B.E. Journal of Theoretical Economics and International Economic Review. His current research focuses on information, portfolio choice, and asset pricing in equilibrium.