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Reframing FinanceNew Models of Long-Term Investment Management$
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Ashby Monk, Rajiv Sharma, and Duncan L. Sinclair

Print publication date: 2017

Print ISBN-13: 9781503601789

Published to Stanford Scholarship Online: January 2018

DOI: 10.11126/stanford/9781503601789.001.0001

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Re-intermediating Investment Management

Re-intermediating Investment Management

(p.54) 3 Re-intermediating Investment Management
Reframing Finance

Ashby Monk

Rajiv Sharma

Duncan L. Sinclair

Stanford University Press

Chapter 3 focuses on the re-intermediating aspect of the collaborative model, explaining the idea that institutional investors need to re-engage with their asset managers in order to obtain greater alignment of interests. The chapter recognizes that asset managers can provide value to their investor clients under the right terms and conditions and seeks to understand what such a governance arrangement looks like. It draws inspiration from the sociology–informed relational contracting method, which emphasizes trust, mutual dependency, and cooperation over the long term as key norms of the contractual engagement. Relational contracting is thus proposed as an ideological form of governance between investors and investment managers, which is practically translated into more discrete mandates, greater responsibility for investors, greater transparency, and robust incentive structures. The chapter provides theoretical evidence for the importance of relational contacts and practical guidance for achieving them.

Keywords:   relational contracts, re-intermediation, long-term contracts, transparency, investment governance, trust, investment management

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