Portfolio Manager Compensation in the U.S. Mutual Fund Industry
Singapore Management University - Lee Kong Chian School of Business
IE Business School
March 2, 2015
Finance Down Under 2014 Building on the Best from the Cellars of Finance
Using a hand-collected dataset of over 5,000 mutual funds, we study the compensation structures of individual portfolio managers in the U.S. mutual fund industry. About three-quarters of the portfolio managers receive performance-linked bonuses from the investment advisors. Managers with performance-linked bonuses exhibit superior subsequent fund performance, especially when advisors link pay to performance over a longer time period. In contrast, alternative compensation arrangements such as fixed salary, pay linked to fund assets or advisor profits are not associated with superior performance. Overall, our study provides novel empirical evidence on the impact of individual portfolio manager compensation on mutual fund performance.
Number of Pages in PDF File: 59
Keywords: Portfolio manager compensation, mutual funds, investment advisors, fund performance
JEL Classification: G23, J33
Date posted: March 18, 2012 ; Last revised: March 4, 2015
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
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