Are Mutual Fund Managers Paid for Investment Skill?
72 Pages Posted: 10 Feb 2017 Last revised: 2 Aug 2017
Date Written: July 31, 2017
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 fixed effects, revenues, and profits add substantial explanatory power for compensation to manager-level revenue and performance.
Keywords: Portfolio Manager Compensation, Mutual Fund Performance, Wage Dynamics
JEL Classification: G00, G23, J24, J31, J33, J44
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