Mutual Fund Risk-Shifting and Management Contracts

@inproceedings{Lee2016MutualFR,
  title={Mutual Fund Risk-Shifting and Management Contracts},
  author={Jung Hoon Lee and Charles Trzcinka and Shyam Sunder Venkatesan},
  year={2016}
}
We find evidence that risk-shifting by mutual fund managers is linked to their asymmetric performance-based compensation. We show that managers whose mid-year performance is close to their announced benchmark increase their portfolio risk in the second part of the year. As their performance deviates from the benchmark, their risk-shifting decreases except for the most extreme deviations. We find that the deviation from the benchmark dominates the incentives from the flow-performance… 
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