Journal of Financial Economics Vol. 145 No. 1 2022
Paying for beta: Leverage demand and asset management fees
Abstract
We examine how investor demand for leverage shapes asset management fees. We show that in the sample of U.S. equity mutual funds: (1) fees increase in fund market beta precisely for beta larger than one; (2) this relation becomes stronger and high-beta funds experience larger inflows when leverage constraints tighten; and (3) low net alphas are especially common among high-beta funds. These results are consistent with a model in which asset managers compete for leverage-constrained investors with heterogeneous risk aversion. The asymmetric relation between betas and fees also extends to the HML and SMB factors.
- DOI
- 10.1016/j.jfineco.2022.04.002
- Volume
- 145
- Issue
- 1
- Pages
- 105-128
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref