Fee Structure and Fund Manager's Optimal Selling Rule

24 Pages Posted: 30 Jul 2019

See all articles by Zhenya Liu

Zhenya Liu

Renmin University of China; CERGAM, Aix-Marseille University

Xuyuan Han

Renmin University of China

Yaosong Zhan

Business School, Sun Yat-sen University

Date Written: July 26, 2019

Abstract

We investigate the impacts of fee structure on a typical on the fund manager's optimal selling price. The fee structure includes the self-investment ratio in the fund, management fee, incentive fee, and the high watermark. Based on the explicit solution of the optimal selling price, we find that the optimal selling price is negatively related to the self-investment ratio and management fee, and positively related to the incentive fee and high watermark. This conclusion inspires designing an incentive contract for the manager: the fund manager should be offered more incentive fee and higher watermark, lower management fee, and self-investment ratio, which will possibly improve the fund performance.

Keywords: Fund Management, Fee Structure, Optimal Selling Rule

JEL Classification: G11, G23, C41

Suggested Citation

Liu, Zhenya and Han, Xuyuan and Zhan, Yaosong, Fee Structure and Fund Manager's Optimal Selling Rule (July 26, 2019). Available at SSRN: https://ssrn.com/abstract=3427319 or http://dx.doi.org/10.2139/ssrn.3427319

Zhenya Liu (Contact Author)

Renmin University of China ( email )

School of Finance
Beijing, Beijing 100872
China

CERGAM, Aix-Marseille University ( email )

Aix-Marseille University
3 Avenue Robert Schuman,
Aix-en-Provence, 13628
France
0781668685 (Phone)

Xuyuan Han

Renmin University of China ( email )

No.29 Zhongguancun Street
Haidian District
Beijing, Beijing 100872
China

Yaosong Zhan

Business School, Sun Yat-sen University ( email )

Shenzhen, Guangdong
China

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