Question

Do you expect fund managers with high ability to prefer compensation that is more performance based? How good an “insurance” is this for fund investors?

Answer 1

Yes. As the fund managers are more efficient they are confident as well as capable of better performance. Higher performance will improve the fund value which will benefit the investors. Hence if the fund managers get performance based compensation, it will be more remunerative for them.

Also it is good for the investors since they get a good return on their investment. They know that the managers are working towards increasing their wealth and the value of the fund.