Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2010/2:
Incentive systems for stock portfolio managers in Sweden
Martin Hedesström ()
Abstract: Interviews with Swedish investment professionals show that
incentivising stock portfolio managers on the basis of short term returns
performance is a widespread practice across several types of fund
management. Among retail funds, state pension funds, and hedge funds,
bonuses are predominantly based on one-year intervals. Longer-term bonus
components, if offered, are generally of insignificant size. Small fund
companies may offer longer-term bonuses, but then as incentive not only to
produce good results but also – if results are good – to stay at the
company for a longer time. Pension insurance companies also apply
longer-term bonuses, possibly because they do not risk money being
withdrawn by investors due to poor performance. Experimental studies are
needed in order to disentangle the effects of longer term bonuses on
sustainable investments.
Keywords: incentive system; compensation scheme; bonus; stock portfolio manager; shorttermism; (follow links to similar papers)
16 pages, December 20, 2009
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