Principal and Agent Problems in Australian Responsible Entities

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Author(s)
Bianchi, Robert
Griffith University Author(s)
Year published
2010
Metadata
Show full item recordAbstract
Since 1998, the Australian funds management industry has seen the creation of the single responsible entity. The introduction of the single responsible entity unifies the role of trustee and investment manager in a legal entity for the purpose of managing investment funds. This paper argues that this dual role of the single responsible entity causes severe principal and agent problems in the Australian managed funds industry. As a result, the single responsible entity benefits the investment manager, but it comes at a cost and risk to investors. These costs are not visible during favourable economic times, but become ...
View more >Since 1998, the Australian funds management industry has seen the creation of the single responsible entity. The introduction of the single responsible entity unifies the role of trustee and investment manager in a legal entity for the purpose of managing investment funds. This paper argues that this dual role of the single responsible entity causes severe principal and agent problems in the Australian managed funds industry. As a result, the single responsible entity benefits the investment manager, but it comes at a cost and risk to investors. These costs are not visible during favourable economic times, but become more evident when investment market conditions deteriorate as evidenced during the 2007-2008 global financial crisis (GFC).
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View more >Since 1998, the Australian funds management industry has seen the creation of the single responsible entity. The introduction of the single responsible entity unifies the role of trustee and investment manager in a legal entity for the purpose of managing investment funds. This paper argues that this dual role of the single responsible entity causes severe principal and agent problems in the Australian managed funds industry. As a result, the single responsible entity benefits the investment manager, but it comes at a cost and risk to investors. These costs are not visible during favourable economic times, but become more evident when investment market conditions deteriorate as evidenced during the 2007-2008 global financial crisis (GFC).
View less >
Journal Title
Deakin Business Review
Volume
3
Issue
1
Publisher URI
Copyright Statement
© 2010 Deakin University. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Subject
Finance
Business and Management
Marketing