Delegated Asset Management, Investment Mandates, and Capital Immobility

This paper develops a model to explain the widely used investment mandates in the institutional asset management industry based on two insights: First, giving a manager more investment flexibility weakens the link between fund performance and his effort in the designated market, and thus increases agency cost. Second, the presence of outside assets with negatively skewed returns can further increase the agency cost if the manager is incentivized to pursue outside opportunities. These effects motivate narrow mandates and tight tracking error constraints to most fund managers except those with exceptional talents. Our model sheds light on capital immobility and market segmentation that are widely observed in financial markets, and highlights important effects of negatively skewed risk on institutional incentive structures.

Inefficient investment waves

We show that firms' individually optimal liquidity management results in socially inefficient boom-and-bust patterns. Financially constrained firms decide on the level of their liquid resources facing cash-flow shocks and time-varying investment opportunities. Firms' liquidity management decisions generate simultaneous waves in aggregate cash holdings and investment, even if technology remains constant. These investment waves are not constrained efficient in general, because the social and private value of liquidity differs. The resulting pecuniary externality affects incentives differentially depending on the state of the economy, and often overinvestment occurs during booms and underinvestment occurs during recessions. In general, policies intended to mitigate underinvestment raise prices during recessions, making overinvestment during booms worse. However, a well-designed price-support policy will increase welfare in both booms and recessions

Localization of proteins in the cell wall of Mycobacterium avium subsp. paratuberculosis K10 by proteomic analysis

Mycobacterium avium subsp. paratuberculosis is a pathogen which causes a debilitating chronic enteritis in ruminants. Unfortunately, the mechanisms that control M. avium subsp. paratuberculosis persistence during infection are poorly understood and the key steps for developing Johne's disease remain elusive. A proteomic analysis approach, based on one dimensional polyacrylamide gel electrophoresis (SDS-PAGE) followed by LC-MS/MS, was used to identify and characterize the cell wall associated proteins of M. avium subsp. paratuberculosis K10 and an cell surface enzymatic shaving method was used to determine the surface-exposed proteins. 309 different proteins were identified, which included 101 proteins previously annotated as hypothetical or conserved hypothetical. 38 proteins were identified as surface-exposed by trypsin treatment. To categorize and analyze these proteomic data on the proteins identified within cell wall of M. avium subsp. paratuberculosis K10, a rational bioinformatic approach was followed. The analyses of the 309 cell wall proteins provided theoretical molecular mass and pI distributions and determined that 18 proteins are shared with the cell surface-exposed proteome. In short, a comprehensive profile of the M. avium subsp. paratuberculosis K10 cell wall subproteome was created. The resulting proteomic profile might become the foundation for the design of new preventive, diagnostic and therapeutic strategies against mycobacterial diseases in general and M. avium subsp. paratuberculosis in particular

Cell wall proteome analysis of Mycobacterium smegmatis strain MC2 155

<p>Abstract</p> <p>Background</p> <p>The usually non-pathogenic soil bacterium <it>Mycobacterium smegmatis </it>is commonly used as a model mycobacterial organism because it is fast growing and shares many features with pathogenic mycobacteria. Proteomic studies of <it>M. smegmatis </it>can shed light on mechanisms of mycobacterial growth, complex lipid metabolism, interactions with the bacterial environment and provide a tractable system for antimycobacterial drug development. The cell wall proteins are particularly interesting in this respect. The aim of this study was to construct a reference protein map for these proteins in <it>M. smegmatis</it>.</p> <p>Results</p> <p>A proteomic analysis approach, based on one dimensional polyacrylamide gel electrophoresis and LC-MS/MS, was used to identify and characterize the cell wall associated proteins of <it>M. smegmatis</it>. An enzymatic cell surface shaving method was used to determine the surface-exposed proteins. As a result, a total of 390 cell wall proteins and 63 surface-exposed proteins were identified. Further analysis of the 390 cell wall proteins provided the theoretical molecular mass and p<it>I </it>distributions and determined that 26 proteins are shared with the surface-exposed proteome. Detailed information about functional classification, signal peptides and number of transmembrane domains are given next to discussing the identified transcriptional regulators, transport proteins and the proteins involved in lipid metabolism and cell division.</p> <p>Conclusion</p> <p>In short, a comprehensive profile of the <it>M. smegmatis </it>cell wall subproteome is reported. The current research may help the identification of some valuable vaccine and drug target candidates and provide foundation for the future design of preventive, diagnostic, and therapeutic strategies against mycobacterial diseases.</p

Intermediary Asset Pricing

We present a model to study the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary. Intermediaries face a constraint on raising equity capital. When the constraint binds, so that intermediaries’ equity capital is scarce, risk premia rise to reflect the capital scarcity. We calibrate the model and show that it does well in matching two aspects of crises: the nonlinearity of risk premia during crisis episodes; and, the speed of adjustment in risk premia from a cri- sis back to pre-crisis levels. We use the model to quantitatively evaluate the effectiveness of a variety of central bank policies, including reducing intermediaries’ borrowing costs, infusing equity capital, and directly intervening in distressed asset markets. All of these policies are effective in aiding the recovery from a crisis. Infusing equity capital into intermediaries is particularly effective because it attacks the equity capital constraint that is at the root of the crisis in our model.

Dynamic Debt Runs

We develop a dynamic model of debt runs on a firm, which invests in an illiquid asset by rolling over staggered short-term debt contracts. We derive a unique threshold equilibrium, in which creditors coordinate their asynchronous rollover decisions based on the firm's publicly observable and time-varying fundamental. Fear of the firm's future rollover risk motivates each maturing creditor to run ahead of others even when the firm is still solvent. Our model provides implications on the roles played by volatility, illiquidity and debt maturity in driving debt runs, as well as on firms' capital adequacy standards and credit risk.