Sharper Fund Management

The current practice of fund management can be altered to improve the lot of both the investor and the fund manager. Tracking error con- straints in mandates can be replaced by an evaluation of the added value provided to the investor by the fund manager. The value of the man- ager depends not only on the outperformance of the manager's fund, but also on its volatility and its correlation to the rest of the investor's port- folio. Hyperpassive funds|an approach suggested by the new mandate scheme|show promise.