Fund Managers′ Relative Performance-Based Incentive Contract

The assumptions of fund managers′ incentive contract model are first expounded,and the investment decisions of agents and the design of principal′s incentive contract are in detail analyzed in this paper.Based on some more relaxed assumptions, an incentive contract model for the principal-agent relation of securities investment fund is proposed and the optimal conditions for the solution to the model are derived.Furthermore,the model is extended to the case of risk-averse principals and it is revealed that a relative performance-based reward schemes may be the optimal incentive contract of principals with fund managers in some cases.