Relative Performance Evaluation for Asset Managers: A Quantitative Assessment

Vincent Grégoire and Sotes-Paladino Juan
Additional contact information
Vincent Grégoire: HEC Montreal
Sotes-Paladino Juan: Universidad de los Andes

No 383, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: Using a unique dataset of performance-fee mutual funds, we quantify incentives from relative performance evaluation (RPE) and their behavioral implications. We measure direct (short-term) incentives by the option delta embedded in performance fees and indirect (long-term) incentives via the value of future fees. RPE funds face stronger short-term and similar or weaker long-term incentives, yielding a more short-term compensation profile. Incentive sensitivity rises with benchmark risk, consistent with models of optimal contracting under learning. While stronger direct incentives increase active risk, long-horizon incentives attenuate this effect. However, performance effects are modest, and managerial skill is reflected mainly in base pay.

Keywords: Relative performance evaluation; incentive fees; direct and indirect incentives; fund flows; managerial risk taking; fund performance. (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2026-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://rednie.eco.unc.edu.ar/files/DT/383.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:383

Access Statistics for this paper

More papers in Working Papers from Red Nacional de Investigadores en Economía (RedNIE) Contact information at EDIRC.
Bibliographic data for series maintained by Laura Inés D Amato ().