The Research On Explicit Incentive Mechanism Of Fund Manager

After more than 130 years development, mutual fund has shown an incompatible growth, which has been more than one hundred times than ever before in the recent the years. The total mutual fund worldwide has increased from 500 thousand dollars initially to now 11 trillion dollars. In September, 1997, China enacted the Law of Mutual Fund Acting Management, which signified that mutual fund , as the main strength of China's fund organizations, began to standardize its way of development.As an instrument of congregate investment and specialized financing, mutual fund actually represents the relationship of principal-agent. The principal (the investor) and the attorney (the fund manager) have different objectives when they cooperate. They share asymmetric of which the principal takes a disadvantage. To the aim of protect effectively the investor's interest, fund manager's incentive-bond mechanism thus becomes an important factor in stipulating investment fund system. However, so far, China's fund industry is still at its primary stage and we are far from being able to establish a well-formulated incentive-bond mechanism that could effectively protect the investor's interest during the actual practice of fund management. Therefore, to establish such a mechanism of fund manager explicit incentive seems more important at this primary stage.This paper aims to optimize China's fund manager explicit incentive scheme. By reviewing the development of both China and America's fund manager incentive mechanism, I make a comparison and analysis of the differences of these two countries' incentive mechanism then have a general view of China's fund manager incentive to further analyze the manager's heterogeneity and explicit needs, fund overhead expanses and portfolio achievement and their possible risks, the status quo and existing problems of explicit incentive mechanism. On these basis, a series of theoretical analysis and demonstrative research are taken in order to find a proper China's fund manager explicit incentive scheme, standardize their acts and protect the interest of the stockholders and other stakeholders to better the funds performance.Firstly, knowing well of the development of the mutual fund of China and America as well as evaluating it fairly and objectively. On this base, a definition is given to the investment fund manager's explicit incentive mechanism so that from the point of policymaking, payment and overhead expanses, we can see a clear distinction the mechanism of these two countries with different economic system and environment.