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The authors found that 77 percent of funds link the pay of their portfolio managers directly to the investment performance of the portfolios that they manage, and that they outperform their counterparts by 40 to 73 basis points per year, depending on metric of performance.
The authors explain that this indicates that performance-linked bonuses are an effective mechanism of aligning the interest of the portfolio manager with that of his or her investors.
In 2005, the SEC adopted Rule S7-12-04, which requires mutual funds to disclose information on how their portfolio managers are compensated in their Statement of Additional Information (a document that they must provide to prospective investors upon request).
In the working paper, “Portfolio Manager Compensation in the U. Mutual Fund Industry,” Linlin Ma, Yuehua Tang, and Juan-Pedro Gómez gather this data to evaluate the impact of mutual fund portfolio manager compensation structure on fund performance.
Literature Review On Mutual Funds The Birth Of High School Papers In The Country