Premium
Fund Advisor Compensation in Closed‐End Funds
Author(s) -
Coles Jeffrey L.,
Suay Jose,
Woodbury Denise
Publication year - 2000
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00251
Subject(s) - closed end fund , business , compensation (psychology) , open end fund , manager of managers fund , finance , fund of funds , income fund , fund administration , investment (military) , institutional investor , corporate governance , psychology , market liquidity , psychoanalysis , politics , political science , law
This paper examines the relation between the premium on closed‐end funds and organizational features of the funds and advisors, including the compensation scheme of the investment advisor. We find that the fund premium is larger when: (a) the advisor's compensation is more sensitive to fund performance; (b) the assets managed by the advisor are concentrated in the fund in question; (c) the advisor manages other funds with low compensation sensitivity to performance and with low concentration of assets managed by the advisor; and (d) the advisor's compensation contract evaluates performance relative to a benchmark.