Research On The Incentive Mechanism Of Security Investment Fund Manager

This paper utilizes principal-agent theory, portfolio theory, delegated portfolio theory and so on to systematically study the influence on the action of fund manager and the function of some typical incentive mechanism from theory and experience.The paper considers the choice of effort and risk of manager and studies the principle of influencing the return of portfolio by manager. The paper puts forward an information structure explanation and solves the optimal choice of effort and risk level of manager simultaneously.Under the conditions of the ability of manager in influencing return of portfolio costly and choosing risk cost-free, the paper adopts the framework of Holmstrom and Milgrom(1987) to discuss the design of contract of manager and compare with the conclusion of general principal-agent problem. Additionally, the paper discusses the function of benchmark writing into contract and finds that this way can play a role of incentive and enhance the understanding of investor to manager.The paper studies the influence of symmetrical and incentive fee structure on the risk taking of manager. The influence of incentive fee structure on the risk taking of manager is analyzed dynamically and the conclusion indicates that it induces the excessive risk choice by manager by all means. Then, if the manager is risk averse, the paper studies the role of the two fee structures. Under the case of symmetrical fee structure, the risk taking of manager is restricted by the preference of manager and investor and market condition. Under the case of incentive fee structure, the manager becomes conservative with the increasing of the asymmetrical level of fee because of the risk aversion of manager. Finally, even consider the risk aversion of manager, the risk taking of manager under the case incentive fee structure is more than under the case of symmetrical fee structure.Based on the conclusions of the literatures about fund flow performance relation, the paper constructs a comprehensive regressive model. Firstly, the paper investigates empirically the "redemption dilemma" and the characteristic of flow performance relation in Chinese fund market. This two researches indicate that the relationship of flow and performance of fund is positive weakly and the "redemption dilemma" is weaker at present in Chinese fund market. But the study on the characteristic of flow performance relation finds that the investor isn't sensitive to performance ranking and the relationship isn't evident. What's more, the conclusions indicate the investor prefers the fund possessing bigger risk and younger fund, which are disadvantageous to capital market.The paper studies the risk taking incentive induced by ranking objective on theory, which indicates that the manager adjusts the risk of portfolio based on the ranking, but the direction of adjustment is uncertainty. Therefore, the conclusion of BHS may be false. Then, the paper investigates empirically the BHS conclusion through the BHS method and finds it doesn't come into existence in Chinese fund market. The paper acquires the same conclusion through a linear regression method. When the paper utilizes the relative performance difference to measure the ranking, it finds that the fund manager has the ranking objective, which holds the BHS conclusion from another view.Finally, according to the conclusions of theoretical and empirical analysis, the paper puts forward that we can utilize holding-fund incentive mechanism to innovate the incentive mechanism of fund manager and we can protect the practice of the incentive mechanism of fund manager from three aspects.