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Active Managers Are Skilled

Posted: 10 Jun 2015  

Jonathan Berk

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Date Written: June 9, 2015

Abstract

Active fund managers are skilled and, on average, have used their skill to generate about $3.2 million per year. Large cross-sectional differences in skill persist for as long as ten years. Investors recognize this skill and reward it by investing more capital in funds managed by better managers. These funds earn higher aggregate fees, and a strong positive correlation exists between current compensation and future performance.

Keywords: Managerial Skill Mutual Fund Performance

JEL Classification: G23, G20, G11, J31

Suggested Citation

Berk, Jonathan and van Binsbergen, Jules H., Active Managers Are Skilled (June 9, 2015). Stanford University Graduate School of Business Research Paper No. 15-37. Available at SSRN: https://ssrn.com/abstract=2616505 or http://dx.doi.org/10.2139/ssrn.2616505

Jonathan Berk (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jules Van Binsbergen

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

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