Capital commitment and performance: The role of mutual fund charges

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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.

Original languageEnglish
JournalJournal of Financial and Quantitative Analysis
Issue number2
Publication statusPublished - Mar 2024


  • capital commitment
  • illiquid stocks
  • investment horizon
  • load fees
  • Mutual fund
  • net alphas
  • sales fee structure
  • slow-moving arbitrage opportunities
  • trading duration
  • value added


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