Are Mutual Fund Managers Paid for Investment Skill?

72 Pages Posted: 10 Feb 2017 Last revised: 2 Aug 2017

See all articles by Markus Ibert

Markus Ibert

Board of Governors of the Federal Reserve System; Stockholm School of Economics - Swedish House of Finance

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); New York University Stern School of Business, Department of Finance

Roine Vestman

Stockholm University - Department of Economics; Swedish House of Finance

Multiple version iconThere are 4 versions of this paper

Date Written: July 31, 2017

Abstract

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

Suggested Citation

Ibert, Markus and Kaniel, Ron and Van Nieuwerburgh, Stijn and Vestman, Roine, Are Mutual Fund Managers Paid for Investment Skill? (July 31, 2017). Swedish House of Finance Research Paper No. 17-9. Available at SSRN: https://ssrn.com/abstract=2914596 or http://dx.doi.org/10.2139/ssrn.2914596

Markus Ibert

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Stockholm School of Economics - Swedish House of Finance ( email )

111 60 Stockholm
Sweden

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

London
United Kingdom

Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

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Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

New York University Stern School of Business, Department of Finance ( email )

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Suite 9-190
New York, NY 10012-1126
United States

Roine Vestman

Stockholm University - Department of Economics ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden

HOME PAGE: http://www.ne.su.se/

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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