DP12241 | Are Mutual Fund Managers Paid For Investment Skill?

Publication Date

08/25/2017

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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.