A Research On The Conflict Between Inverstors And Fund Managers Based On Fund Size

When the market turned from a bull market to a bear market in 2008,investors suffered huge losses while the fund companies made a lot of money.This caused investors dissatisfaction and questioned with the fixed management fee rate based on the fund’s net asset value of the public fund.However,insiders said that foreign public funds also generally use a fixed management fee charging mode.In recent years,research on the erosion of the scale of the fund has once again triggered our consideration of such a fixed management fee charging model based on the net asset value of the fund.Whether China’s compensation contracts of public fund can balance the interests of fund managers and investors has once again been questioned.The conflict of interest between investors and fund managers in China is mostly analyzed from the theoretical aspect on system and legal design,but the empirical analysis on the conflicts of interest between the two is still vague.Therefore,for the first time in domestic,this paper constructs the model of conflict of interest between fund managers and investors.From the perspective of optimal fund size,this paper examines whether the compensation contracts in the public fund industry can inspire fund managers to choose the optimal scale for maximizing the interests of investors.It provides an important guiding role for the design of the remuneration contract in our country and can guide investors’ behavior reasonably.In addition,this paper has carried out related research from the angle of fund family,which is also a highlight of this study.The data of this paper are from Guotaian China Open Fund Database,and analyzed by SAS,through the group averaging method and polynomial regression method.From the perspective of single fund and fund family,analyzed respectively the conflict of interest between fund managers and investors: For investors,it is theirs optimum size when the fund size of the best-performing.But for fund managers,it is theirs optimum size when the fund size of the maximization compensation.If the fund managers can represent the interests of investors,then the two optimum sizes should be equal to each other.However,the empirical results show that the actual fund size chosen by the fund manager is much larger than the fund’s best performance,that is,the fund manager increases his income at the expense of the investors.Bsides in order to ensure the net inflow of funds,fund managers will choose the average performance to maintain the scale of the largest.Furthermore through theoretical analysis,it founds that the underlying reason behind foreign public funds mostly adopt fixed management fee is the mature financial market,sound laws and regulations and a perfect credit system in the west market.The perfection of the relevant system is the fundamental way to change the existing problems in the fund industry in our country.However,from a micro perspective,a reasonable remuneration contract can stimulate the interests of fund management companies and investors alike.The last but not the least,there are some recommendes: First,the fund industry should explore a variety of compensation contract models to promote the healthy development of the industry.In addition,the fund may be allowed to gradually liberalize the restrictions on the investment mechanism of the fund,give full play to the advantages of large-scale and management capabilities.For investors,long-term investment should be selected for the fund’s performance ranking consecutive top fund,and not only to pay attention to the size of a single fund,but also pay attention to the size of the fund family.