Portfolio Manager Compensation in the U.S. Mutual Fund Industry
Singapore Management University - Lee Kong Chian School of Business
IE Business School
November 16, 2015
Finance Down Under 2014 Building on the Best from the Cellars of Finance
Using a hand-collected data set of over 3,800 mutual funds, we study the compensation structures of individual portfolio managers in the U.S. mutual fund industry. About three-quarters of portfolio managers receive performance-based pay from investment advisors. Managers with performance-based pay exhibit superior subsequent fund performance, especially when advisors link pay to performance over a longer time period. In contrast, alternative compensation arrangements are not associated with superior subsequent performance. Managers with performance-based pay also engage less in risk-shifting activities. Overall, our study documents novel empirical evidence on the impact of portfolio manager compensation on mutual fund performance and risk taking.
Number of Pages in PDF File: 87
Keywords: Portfolio manager compensation, mutual funds, investment advisors, fund performance
JEL Classification: G23, J33
Date posted: March 18, 2012 ; Last revised: November 16, 2015
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
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