Scientific Definition
Percentage-of-AUM fees reward gathering assets regardless of net performance.
Plain-English Definition
Percentage-of-AUM fees reward gathering assets regardless of net performance.
Feynman Explanation
The fund makes money whether you do or not.
Core Principle
Percentage-of-AUM fees reward gathering assets regardless of net performance.
Mechanisms
Pending editorial review.
Percentage-of-AUM fees reward gathering assets regardless of net performance.
Pending editorial review.
Pending editorial review.
Fee structures shape capital allocation more than skill does.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
The fund makes money whether you do or not.
Examples
- Closet-index funds charging active-management fees.
- Fee structures shape capital allocation more than skill does.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Performance-fee designs. Net-of-fee disclosure.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Performance-fee designs. Net-of-fee disclosure.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
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Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Quarterly earnings drive quarterly behavior.
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Auditors paid by the firms they audit have predictable blind spots.
Quarterly bonuses create end-of-quarter behavior changes.
Government rescues of failing institutions privatize gains and socialize losses.
Issuers pay raters who compete for the highest ratings.
Originators paid on volume, not on default rates.
Originators paid on volume, not on default rates, fueled the subprime collapse.
EPS-targeted comp incentivizes buybacks even when reinvestment yields more.
Candidates dependent on large donors become structurally responsive to donor priorities over voter priorities.
Police agencies that keep seized assets gain a direct fiscal interest in seizures.
Discount framing nudges people to buy things they wouldn't otherwise want.