Managerial rents vs. shareholder value in delegated portfolio management: the case of closed-end funds

  • We examine the dynamics of assets under management (AUM) and management fees at the portfolio manager level in the closed-end fund industry. We find that managers capitalize on good past performance and favorable investor perception about future performance, as reflected in fund premiums, through AUM expansions and fee increases. However, the penalties for poor performance or unfavorable investor perception are either insignificant, or substantially mitigated by manager tenure. Long tenure is generally associated with poor performance and high discounts. Our findings suggest substantial managerial power in capturing CEF rents. We also document significant diseconomies of scale at the manager level.

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Author:Youchang Wu, Russ Wermers, Josef ZechnerORCiDGND
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 548
Series (Serial Number):CFS working paper series (548)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2016/11/01
Tag:Closed-end fund; Closed-end fund discount; Managerial rent
Issue:July 3, 2016
Page Number:63
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht