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Mutual Fund Advisory Contracts: An Empirical Investigation
Author(s) -
Deli Daniel N.
Publication year - 2002
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 - 10.1111/1540-6261.00417
Subject(s) - business , mutual fund , equity (law) , marginal cost , closed end fund , manager of managers fund , compensation (psychology) , income fund , finance , fund administration , fund of funds , economics , microeconomics , market liquidity , political science , psychology , psychoanalysis , law
We investigate marginal compensation rates in mutual fund advisory contracts and find the following. Equity and foreign fund advisors receive higher marginal compensation than debt and domestic fund advisors. Advisors of funds with greater turnover receive higher marginal compensation. Also, closedend fund advisors receive higher marginal compensation than open‐end fund advisors. Finally, we find that marginal compensation is lower for advisors of large funds and members of large fund families. We argue that these differences in marginal compensation reflect differences in advisor marginal product, differences in the difficulty of monitoring performance, differences in control environments, and scale economies.