FIN-02-004
Delegated Monitoring of Fund ManagersSimon Gervais, Anthony W. Lynch and David K. Musto July 2002 |
|
| FIN-02-004 |
|
| Delegated Monitoring of Fund Managers |
| Simon Gervais, Anthony W. Lynch and David K. Musto July 2002 |
| 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. | |
| |
| Simon Gervais | |
| Institution: Finance Department, Wharton School, University of Pennsylvania, Steinberg Hall - Dietrich Hall, Suite 2300, Philadelphia, PA
Email: gervais@wharton.upenn.edu Phone: (215) 898-2370 |
|
| |
| Anthony W. Lynch | |
| Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012-1126
Email: alynch@stern.nyu.edu Phone: (212) 998-0350 Fax: (212) 995-4223 Home Page: http://www.stern.nyu.edu/~alynch |
|
| |
| David K. Musto | |
| Institution: Finance Department, Wharton School, University of Pennsylvania, Steinberg Hall - Dietrich Hall, Suite 2300, Philadelphia, PA 19104-6367
Email: musto@wharton.upenn.edu Phone: (215) 898-4239 |
|
| |
 |
|
|
The 2002 Department of Finance Working Paper Series has been generously sponsored by  |
To download a copy of this paper click