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Dynamic Management of Mutual Fund Advisory Contracts = Yatırım Fonu Anlaşmalarının Dinamik Yönetimi

Author(s): Yaman Ö. ERZURUMLU

Journal: Dogus University Journal
ISSN 1302-6739

Volume: 7;
Issue: 2;
Start page: 172;
Date: 2006;
Original page

Keywords: Mutual fund | Advisory fee | Management fee | Contract | Adviser

The price of professional portfolio management provided by the mutual fund adviser depends not only on the fund characteristics but also on the fund objective, the adviser's portfolio related and management based decisions, and the portfolio performance. I analyze the advisory fee, using a survivorship bias free data set of 176 equity funds managed by 125 different advisers. Advisers benchmark the objective average but this benefit the shareholders only when the objective trend is descending. Advisers tend to reduce the cost of their marginal product through the use of derivatives or manipulate by engaging in soft dollar agreements. I find that the advisers actively manage the advisory fee contracts responding to the outcome of their management decisions. The advisory fee increases after voluntary fee reimbursement or if the adviser is not fully reimbursed for the compensation of independent directors and officers.

Tango Jona
Tangokurs Rapperswil-Jona

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