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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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