Are Mutual Fund Managers Paid for Investment Skill?
64 Pages Posted: 1 May 2017 Last revised: 14 May 2023
There are 4 versions of this paper
Are Mutual Fund Managers Paid for Investment Skill?
Are Mutual Fund Managers Paid for Investment Skill?
Are Mutual Fund Managers Paid for Investment Skill?
Are Mutual Fund Managers Paid for Investment Skill?
Date Written: April 2017
Abstract
Compensation of mutual fund managers is paramount to understanding agency frictions in asset delegation. We collect a unique registry-based dataset on the compensation of Swedish mutual fund managers. We find a concave relationship between pay and revenue, in contrast to how investors compensate the fund company (firm). We also find a surprisingly weak sensitivity of pay to performance, even after accounting for the indirect effects of performance on revenue. Firm-level revenues and profits add substantial explanatory power for compensation to manager-level revenue and performance, highlighting the importance of the mutual fund firm.
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