Despite the enormous growth of the asset management industry during the pastdecades, little is known so far about the asset pricing implications of investmentintermediaries. Investment objectives of professional asset managers such as mutualfunds differ from those of private households. However, standard models of invest-ment theory do not address the distinction between direct investing and delegatedinvesting. Our objective is to get a formal understanding of equilibrium implica-tions of delegated asset management. In a model with endogenous delegation, we¯nd that delegation under benchmarking leads to more informative prices, to a betaadjustment, and to signi¯cantly lower equity premia.