Peer Versus Pure Benchmarks in the Compensation of Mutual Fund Managers
We examine the role of peer (e.g., Lipper manager indices) versus pure (e.g., S&P 500) benchmarks in fund manager compensation. We model their impact on manager incentives and then test those predictions using novel data. We find that 71% of managers are compensated based on peer benchmarks. Con...
| Autores: | , , , |
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| Tipo de recurso: | artículo |
| Fecha de publicación: | 2023 |
| País: | España |
| Institución: | IE |
| Repositorio: | Repositorio IE |
| OAI Identifier: | oai:repositorio.ie.edu:20.500.14417/3293 |
| Acceso en línea: | https://doi.org/10.1017/S0022109023001230 https://hdl.handle.net/20.500.14417/3293 |
| Access Level: | acceso abierto |
| Palabra clave: | Fund managers 53 Ciencias Económicas::5311 Organización y dirección de empresas ::5311.06 Estudio de mercados ODS 8 - Trabajo decente y crecimiento económico |
| Sumario: | We examine the role of peer (e.g., Lipper manager indices) versus pure (e.g., S&P 500) benchmarks in fund manager compensation. We model their impact on manager incentives and then test those predictions using novel data. We find that 71% of managers are compensated based on peer benchmarks. Consistent with the model, peer-benchmarked fund managers exhibit higher effort generating higher gross performance and collect higher fee income. Analyzing advisors’ choice between benchmark types, we show that peer-benchmarking advisors cater to more sophisticated and performance-sensitive investors, and are more likely to sell through direct channels, consistent with investor heterogeneity and market segmentation. |
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