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|Title: ||Delegated Monitoring of Fund Managers|
|Authors: ||Gervais, Simon|
Lynch, Anthony W.
Musto, David K.
|Issue Date: ||25-Jul-2002 |
|Series/Report no.: ||FIN-02-004|
|Abstract: ||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.
In this way, large fund families add value through cross-sectional
reputation. As the number of managers grows the efficiency loss goes to zero.|
|Appears in Collections:||Finance Working Papers|
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