Fund families as delegated monitors of money managers

Published

Journal Article (Review)

Because a money manager learns more about her skill from her management experience than outsiders can learn from her realized returns, she expects inefficiency in future contracts that condition exclusively on realized returns. A fund family that learns what the manager learns can reduce this inefficiency cost if the family is large enough. The family's incentive is to retain any given manager regardless of her skill but, when the family has enough managers, it adds value by boosting the credibility of its retentions through the firing of others. As the number of managers grows, the efficiency loss goes to zero.

Full Text

Duke Authors

Cited Authors

  • Gervais, S; Lynch, AW; Musto, DK

Published Date

  • December 1, 2005

Published In

Volume / Issue

  • 18 / 4

Start / End Page

  • 1139 - 1169

Electronic International Standard Serial Number (EISSN)

  • 1465-7368

International Standard Serial Number (ISSN)

  • 0893-9454

Digital Object Identifier (DOI)

  • 10.1093/rfs/hhi031

Citation Source

  • Scopus