journal article Jun 06, 2017

Incentive Fees and Competition in Pension Funds: Evidence from a Regulatory Experiment

View at Publisher Save 10.1561/108.00000015
Abstract
Concerned with excessive risk-taking, regulators worldwide generally prohibit performance-based fees in pension funds. Presumably, competition can substitute for incentive pay in providing incentives for fund managers to serve their clients’ interests. Using a regulatory experiment from Israel, we compare the performance of three exogenously-given long-term savings schemes: Funds with performance-based fees, facing no competition; funds with assetsunder-management (AUM)-based fees and virtually no competition; and funds with AUM-based fees, operating in a competitive environment. Funds with performance-based fees exhibit the highest risk-adjusted returns without assuming more risk. Competitive pressure is not associated with similar outcomes, suggesting that incentives and competition are not substitutes in the retirement savings industry.
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Metrics
13
Citations
60
References
Details
Published
Jun 06, 2017
Vol/Issue
2(1)
Pages
49-86
Cite This Article
Assaf Hamdani, Eugene Kandel, Yevgeny Mugerman, et al. (2017). Incentive Fees and Competition in Pension Funds: Evidence from a Regulatory Experiment. Journal of Law, Finance, and Accounting, 2(1), 49-86. https://doi.org/10.1561/108.00000015
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