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Are Mutual Fund Managers Paid For Investment Skill?

Markus Ibert, Ron Kaniel, Stijn Van Nieuwerburgh, Roine Vestman

NBER Working Paper No. 23373
Issued in April 2017
NBER Program(s):Asset Pricing, Corporate Finance, Labor Studies

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.

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Document Object Identifier (DOI): 10.3386/w23373

Published: Markus Ibert & Ron Kaniel & Stijn Van Nieuwerburgh & Roine Vestman, 2018. "Are Mutual Fund Managers Paid for Investment Skill?," The Review of Financial Studies, vol 31(2), pages 715-772.

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