his paper examines a model of delegated investment within the framework of a noisy rational expectations equilibrium. Portfolio managers can acquire costly signals about asset payoffs but incur portfolio management costs. They receive compensation from delegated investors and make investment decisions on their behalf. The optimal contract includes a benchmark component that mitigates agency frictions arising from portfolio management costs. The precision of private signals chosen by portfolio managers is determined by equilibrium market conditions. Private and public signals substitute. When portfolio management costs increase, both the performance and benchmark components of the optimal contract increase, less private signals are aggregated into the public signal, leading to a worse public price informational efficiency. When a social planner has sufficient concerns on the welfare of direct investors or liquidity providers, the social optimal public price informational efficiency improves compared to the decentralized economy counterparts.