Market Risks in Asset Management Companies

This paper shows that revenues from a sample of publicly traded US asset management companies carry substantial market risks. Not only does this challenge the academic risk management literature about the predominance of operative risks in asset management. It also is at odds with current practice in asset management firms. Asset managers do not hedge market risks even though these risks are systematically built into the revenue generation process. A revisited version of this paper was published in Quantitative Finance, Volume 12, Issue 10, 2012.