Managerial Incentives and Effort Substitution in Concurrent Mutual Fund Management

Abstract

This study investigates the impact of incentives on managerial effort substitution within the context of multi-tasking in the mutual fund industry. We focus on fund managers concurrently managing newly issued and incumbent funds. Extending the multi-task principal-agent model, we explore the pivotal role of implicit incentives in performance measures, specifically net fund flows and asset appreciation, in motivating fund managers to allocate their efforts. Our study sheds light on the intricate relationship between multi-tasking incentives and effort substitution, particularly towards newly issued funds.

Keywords: Mutual Funds, Multi-tasking, Fund Managers, Effort Substitution, Incentives