Chapter

Managing Costs

August Baker, Dennis E. Logue and Jack S. Rader

in Managing Pension and Retirement Plans

Published in print November 2004 | ISBN: 9780195165906
Published online July 2005 | e-ISBN: 9780199835508 | DOI: http://dx.doi.org/10.1093/019516590X.003.0019
 Managing Costs

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The effective management of a pension plan requires managing the costs of asset management. This means understanding and controlling investment costs such as the costs of trading, custody, and so forth. Transaction costs erode portfolio value. Thus, a trade must be motivated by an investment idea that adds more value than is destroyed or by a constraint such as liquidity that overrides the cost of the trade. Pension boards and senior management must understand the costs incurred in trading and how they may be controlled to ensure that more value is added than destroyed.

Keywords: pension plans; asset management; cost control; transaction costs

Chapter.  3888 words. 

Subjects: Financial Markets

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