Are Mutual Fund Managers Paid for Investment Skill?
64 Pages Posted: 1 May 2017 Last revised: 14 May 2021
Date Written: April 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 revenues and profits add substantial explanatory power for compensation to manager-level revenue and performance, highlighting the importance of the mutual fund firm.
Suggested Citation: Suggested Citation