Browsing by Author "Tang, Yuehua"

Now showing 1 - 2 of 2
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    Peer Versus Pure Benchmarks in the Compensation of Mutual Fund Managers
    (Cambridge University Press, 2023-11-06) Evans, Richard; Ma, LinLin; Gómez, Juan Pedro; Tang, Yuehua; Ministerio de Economía y Competitividad; Agencia Estatal de Investigación; European Regional Development Fund; National Natural Science Foundation of China ; https://ror.org/02jjdwm75
    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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    Portfolio Manager Compensation in the U.S. Mutual Fund Industry
    (Wiley, 2018-12-12) Ma, LinLin; Tang, Yuehua; Gómez, Juan Pedro; Ministry of Education of Singapore; Ministerio de Economía y Competitividad; Banco de España; https://ror.org/02jjdwm75
    We study compensation contracts of individual portfolio managers using hand-collected data of over 4,500 U.S. mutual funds. Variations in the compensation structures are broadly consistent with an optimal contracting equilibrium. The likelihood of explicit performance-based incentives is positively correlated with the intensity of agency conflicts, as proxied by the advisor's clientele dispersion, its affiliations in the financial industry, and its ownership structure. Investor sophistication and the threat of dismissal in outsourced funds serve as substitutes for explicit performance-based incentives. Finally, we find little evidence of differences in future performance associated with any particular compensation arrangement.