Fund managers are paid a fixed management fee in proportion to their assets under management. This means to maximize … revenue, managers hoard assets. Whilst this results in increased revenue for the manager often, due to diseconomies of scale … this perverse incentive. The ‘incentive fee hypothesis' states that once managers become sufficiently incentivized to …

opportunities at different horizons. Equilibrium returns are endogenously determined by competition. Short-term investment … strategies can benefit fund managers by accelerating skill revelation, while the downside risk is managed by manager exit. In the … steady state, a large number of new and unskilled managers exploit the value of this call option, driving down short …

uninformed managers (i.e. churning). We find that churning does not necessarily reduce the return that a representative investor … expects ex-ante from delegating trade to a manager. As uninformed managers churn, the level of noise in the market increases … and informed managers generate higher returns than in the absence of churning. When fundamental volatility is relatively …

, which may keep managers from fully internalising the effects of adverse outcomes on their portfolios. The fact that market … discipline may not be sufficient to ensure prudential behaviour among managers, combined with the externalities of this risk …

incentives, there continues to be a misalignment between fund managers’ and investors’ interests. This paper analyzes whether … investors are able to affect fund performance by influencing fund managers’ willingness to perform better in the future …

, which may keep managers from fully internalising the effects of adverse outcomes on their portfolios. The fact that market … discipline may not be sufficient to ensure prudential behaviour among managers, combined with the externalities of this risk …