. Benchmarking generates additional, inelastic demand for assets inside the benchmark. This leads to a “benchmark inclusion subsidy …

We propose a model of asset management in which benchmarking arises endogenously, and analyze its unintended welfare … prices. Benchmarking inflates asset prices and gives rise to crowded trades, thereby reducing the effectiveness of incentive … crowding, opts for less benchmarking and less incentive provision. We also show that asset management costs are lower with …