You Have to Attack the Incentive System: Aperture's Kraus

The video discusses the founding of Aperture, a firm that links manager pay to performance, aiming to address persistent performance challenges in the active management space. It explains Aperture's recruitment strategy, which focuses on managers with a history of strong performance, and details the firm's fund structure, which includes a modest base fee and a performance fee. The video also compares ETFs and mutual funds, highlighting differences in fees, tax efficiency, and trading practices.

What was the primary reason for the inception of Aperture?

• To reduce management fees

• To focus on passive investment strategies

• To link pay to performance and improve active management

• To increase the size of the firm

How does Aperture's incentive system differ from traditional mutual funds?

• It guarantees bonuses every quarter

• It provides compensation based on performance

• It offers a high base salary regardless of performance

• It focuses on reducing management fees

What is a significant advantage of ETFs over mutual funds?

• Favorable tax treatment

• Higher tracking errors

• More complex trading processes

• Higher management fees

What is a tracking error in the context of ETFs?

• The base management fee of the ETF

• The tax advantage of the ETF

• The fee charged by the ETF

• The difference between the ETF's return and the index return

What potential change could make mutual funds more like ETFs?

• Eliminating performance-based compensation

• Increasing the base salary for managers

• Allowing continuous trading and pricing

• Reducing management fees