Literature Review On Mutual Funds

Literature Review On Mutual Funds-47
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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.

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Literature Review On Mutual Funds The Birth Of High School Papers In The Country

By continuing to use this site, you consent to the use of cookies.He finds that funds that outsource all of their shareholder services outperform their counterparts by 39 to 253 basis points per year, depending on metric of performance and performance regression model specification.Sorhage believes that this is likely because funds that outsource their non-core tasks are more focused on performing their core task of portfolio management.It should be noted that some of the papers reviewed in this month’s column are working papers and, as such, the results are subject to change.In a 2013 paper, “Outsourcing Mutual Fund Management: Firm Boundaries, Incentives, and Performance,” published by Joseph Chen, Harrison Hong, Wenxi Jiang, and Jeffrey D.The authors believe that this is likely because the interests of the managers are more aligned with those of the investors when the managers are directly employed by the funds.Oftentimes, when a mutual fund outsources the management of its portfolio, it will outsource it to an investment advisory firm that also has its own brand of funds.The world of finance has witnessed an exponential growth in the post information technology revolution of the 1990s.The present study made an attempt to do a diagnostic analysis of past literature, though a lot of research has been done on investors' perception on mutual funds.Chuprinin, Massa, and Schumacher provided empirical support for the “conflicts of interest” explanation that Chen, Hong, Jiang, and Kubik espoused for their finding that funds managed by external investment advisory firms underperformed those managed in-house.In the working paper, “Outsourcing of Mutual Funds’ Non-Core Competencies,” Christoph Sorhage compares the performance of mutual funds that administer their shareholder services in-house versus those that outsource these non-core tasks to external firms.


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