Fiduciary Duty and Incentive Systems
Impact of Incentive System and Monitoring Frequency on Portfolio Managers’ Investment Decisions
Tommy Gärling, Maria Andersson
Surveys show that practice in Sweden is to incentivize portfolio managers based on short-term performance. In general people prefer to reap immediate benefits. This is confirmed by the results of our experiments in that short-term bonuses paid out every year are preferred to nominally equally large long-term bonuses. We have also shown that shorter evaluation intervals lead to worse performance than longer evaluation intervals. A third question addressed during 2011 is whether investors diversify portfolios by taking both short-term and long-term value development into account.
Incentive Schemes for CSR Asset Management – Delegated Portfolio Management in a Dynamic Setting
Stefano Herzel, Annalisa Fabretti, Marco Nicolosi, Fausto Gozzi
The objective of this project is to formulate a theoretical model for the study of the incentive systems for CSR Asset Managers. Under the working hypothesis that it is possible through the active management of a SR fund to obtain financial performances that are comparable or even better than those of a conventional fund, we propose a way to set the incentives according to the skill of portfolio managers and to the difficulty of their task. An important aspect of the project is the empirical validation of the hypothesis.