Discussion Paper Details

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Title: Are Mutual Fund Managers Paid For Investment Skill?

Author(s): Marcus Ibert, Ron Kaniel, Stijn van Nieuwerburgh and Roine Vestman

Publication Date: August 2017

Keyword(s): financial sector income, mutual fund performance and Portfolio manager compensation

Programme Area(s): Financial Economics and Labour Economics

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.

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Bibliographic Reference

Ibert, M, Kaniel, R, van Nieuwerburgh, S and Vestman, R. 2017. 'Are Mutual Fund Managers Paid For Investment Skill?'. London, Centre for Economic Policy Research.