Working Paper: NBER ID: w31986
Authors: Xiao Cen; Winston Wei Dou; Leonid Kogan; Wei Wu
Abstract: We develop a unique dataset, the first-ever of its kind, by leveraging the US Census Bureau’s LEHD program and various big textual data sources, to examine the factors influencing the compensation and career trajectories of US active equity mutual fund managers. We find that managers’ compensation is primarily determined by assets under management (AUM), with return performance directly influencing bonuses beyond its impact on AUM. Despite not aligning with client interests, fund flows significantly affect manager compensation and career outcomes. Large fund outflows increase a manager’s likelihood of job turnover (with a substantial decline in compensation) by 4 percentage points.
Keywords: No keywords provided
JEL Codes: G11; G23; J24; J31; J33; J44; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fund flows (F21) | Fund managers' compensation (G23) |
| Assets under management (AUM) (G23) | Fund managers' compensation (G23) |
| Fund performance (G19) | Assets under management (AUM) (G23) |
| Systematic flow components (E50) | Base salaries (J31) |
| Idiosyncratic elements (Y90) | Bonuses (M52) |
| Large fund outflows (G23) | Job turnover for fund managers (J63) |
| Job turnover for fund managers (J63) | Income decline (E25) |
| Systematic components of fund flows (G23) | Career risk of fund managers (G11) |
| Idiosyncratic components of fund flows (F32) | Career risk of fund managers (G11) |
| Fund flows (F21) | Downside career risks (J62) |
| Large inflows (F21) | Income promotions (J62) |
| Large outflows (F32) | Income demotions (J62) |
| Lagged AUM and revenue (G19) | Fund manager compensation (M12) |