The Man Who Could Eat Half the Profit in Fund Management

In June 2016, he laid bare the asset management industry's dirty little secrets: actively managed products haven't performed better than their benchmarks; firms have grown too big as they focus on gathering assets; and fees have been structured to benefit shareholders rather than clients. That message proved unpalatable. Within a year, Peter Kraus was out as chief executive officer of AllianceBernstein Holding LP.

But at least one of the remedies he championed at the $480 billion fund manager is catching on. Shortly before Kraus's departure, his firm won approval to introduce performance-based fees in the U.S., and may do the same in Europe. Fidelity International has introduced what it calls a fulcrum fee model, and Japan's $1.5 trillion Government Pension Investment Fund has said external firms will get the same as their passive peers unless they outperform their benchmarks.