Are Mutual Fund Managers Paid for Investment Skill?

64 Pages Posted: 1 May 2017 Last revised: 14 May 2021

See all articles by Markus Ibert

Markus Ibert

Board of Governors of the Federal Reserve System; 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); ABFER; New York University (NYU)

Roine Vestman

Stockholm University - Department of Economics; Swedish House of Finance

Multiple version iconThere are 4 versions of this paper

Date Written: April 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 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

Ibert, Markus and Kaniel, Ron and Van Nieuwerburgh, Stijn and Vestman, Roine, Are Mutual Fund Managers Paid for Investment Skill? (April 2017). NBER Working Paper No. w23373, Available at SSRN: https://ssrn.com/abstract=2961097

Markus Ibert (Contact Author)

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Ron Kaniel

University of Rochester - Simon Business School ( email )

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Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

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Roine Vestman

Stockholm University - Department of Economics ( email )

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