IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v59y2024i2p727-758_9.html
   My bibliography  Save this article

Capital Commitment and Performance: The Role of Mutual Fund Charges

Author

Listed:
  • Gómez, Juan-Pedro
  • Prado, Melissa Porras
  • Zambrana, Rafael

Abstract

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.

Suggested Citation

  • Gómez, Juan-Pedro & Prado, Melissa Porras & Zambrana, Rafael, 2024. "Capital Commitment and Performance: The Role of Mutual Fund Charges," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(2), pages 727-758, March.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:2:p:727-758_9
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109022001235/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:59:y:2024:i:2:p:727-758_9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.