This paper studies the incentive effect of linear performance-adjusted contracts in delegated portfolio management under a value-at-risk (VaR) constraint. It is shown that a linear performance-based contract can provide incentives for the portfolio manager to work at acquiring private...

Fund managers in delegated portfolio management face asymmetries in their compensation contracts and in the fund flows contingent on their funds' performance relative to a benchmark. In this study we investigate the impacts of contract asymmetry and fund flow asymmetry on the risk-taking...