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Capital commitment and performance
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Orientador(es)
Resumo(s)
We study how the scarcity of committed capital affects the equilibrium distribution of net alphas in the asset management industry. We propose a model of active portfolio management with different sales fee structures where committed capital is in short supply. In the model, a portfolio's excess return is not fully appropriated by the money manager but shared with long-term investors. Empirically, we show that capital commitment allows funds to hold shares longer and take advantage of slow-moving arbitrage opportunities. Consistent with the model, funds with more committed capital generate higher value added, which, net of fees, accrues to long-term investors.
Descrição
This work was funded by the Fundação para a Ciência e a Tecnologia (UID/ECO/00124/2019, UIDB/00124/2020, UIDP/00124/2020, and Social Sciences DataLab PINFRA/22209/2016), the POR Lisboa and POR Norte (Social Sciences DataLab PINFRA/22209/2016), the Spanish Ministry of Economy and Competitiveness (MCIU), the State Research Agency (AEI), and the European Regional Development Fund (ERDF) Grant Nos. PGC2018-101745-A-I00 and PID2021-125359NB-I00, and MCIN/AEI/10.13039/501100011033/FEDER (UE Grant No. PID2021-125359NB-I00).
Palavras-chave
capital commitment illiquid stocks investment horizon load fees Mutual fund net alphas sales fee structure slow-moving arbitrage opportunities trading duration value added Accounting Finance Economics and Econometrics