Optimal performance fee and flow of funds in asset management contracts

This paper investigates the importance of ow of funds as an implicit incentive in the asset management industry. We build a two-period bi- nomial moral hazard model to explain the trade-o¤s between ow, per- formance and fees where e¤ort depends on the combination of implicit ( ow of funds) and explicit (performance fee) incentives. Two cases are considered. With full commitment, the investor s relevant trade-o¤ is to give up expected return in the second period vis-à-vis to induce e¤ort in the rst period. The more concerned the investor is with today s pay- o¤, the more willing he will be to give up expected return in the second period by penalizing negative excess return in the rst period. Without full commitment, the investor learns some symmetric and imperfect infor- mation about the ability of the manager to obtain positive excess return. In this case, observed returns reveal ability as well as e¤ort choices. We show that powerful implicit incentives may explain the ow-performance relationship with a numerical solution. Besides, risk aversion explains the complementarity between performance fee and ow of funds.

The marginal cost of funds from public sector borrowing

An expression for the welfare cost of a marginal increase in the public debt is derived using a simple AK endogenous growth model. This measure of the marginal cost of public funds (MCF) can be interpreted as the marginal benefit-cost ratio that a debtfinanced public project needs in order to generate a net social gain. The model predicts an increase in the public debt ratio will have little effect on the optimal public expenditure ratio and that most of the adjustment will occur on the tax side of the budget.

On the statistical estimation of diffusion processes - a partial survey

Data available on continuous-time diffusions are always sampled discretely in time. In most cases, the likelihood function of the observations is not directly computable. This survey covers a sample of the statistical methods that have been developed to solve this problem. We concentrate on some recent contributions to the literature based on three di§erent approaches to the problem: an improvement of the Euler-Maruyama discretization scheme, the employment of Martingale Estimating Functions, and the application of Generalized Method of Moments (GMM).

The effect of guia exame's ratings on the brazilian fund industry: an analysis of net-worth flows

This paper infers the impact the publication Guia Exame (the guide) has on the Brazilian fund industry, more specifically on the ability the concerned funds develop on attracting new investment. The impact is measured using the event-study analysis based on the variation of net worth subsequently to the event of being rated, according to the methodology applied by the guide to rank the funds. We used five years of fund ratings according to Guia Exame (2000-2004) and analyzed the changes of these funds net worth. We also compared the event amongst different categories of funds. The results found confirm the expected effects according to star rankings and asset manager size in all years.

Information asymmetry and competition in credit markets: the pricing of overdraft loans in Brazil

This paper evaluates how information asymmetry affects the strength of competition in credit markets. A theory is presented in which adverse selection softens competition by decreasing the incentives creditors have for competing in the interest rate dimension. In equilibirum, although creditors compete, the outcome is similar to collusion. Three empirical implications arise. First, interest rate should respond asymmetrically to changes in the cost of funds: increases in cost of funds should, on average, have a larger effect on interest rates than decreases. Second, aggressiveness in pricing should be associated with a worseing in the bank level default rates. Third, bank level default rates should be endogenous. We then verify the validity of these three empirical implications using Brazilian data on consumer overdraft loans. The results in this paper rationalize seemingly abnormallly high interest rates in unsecured loans.

Firm financial constraints and the impact of monetary policy: evidence from financial conglomerates

Building on recent evidence on the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the balance sheet channel of monetary policy. It does so by comparing monetary policy responses of small banks that are affiliated with the same bank holding company, and this arguably face similar constraints in accessing internal/external sources of funds, but that operate in different geographical regions, and thus face different pools of borrowers. Because these subsidiaries typically concentrate their lending with small local businesses, we can use cross-sectional differences in state-level economic indicators at the time of changes of monetary policy to study whether or not the strength of borrowers' balance sheets influences the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have 'weak balance sheets. Our evidence suggests that the monetary authority should consider the amplification effects that financial constraints play following changes in basic interest rates and the role of financial conglomerates in the transmission of monetary policy.

Optimal provision of implicit and explicit incentives in asset management contracts

This paper investigates the importance of the fiow of funds as an implicit incetive provided by investors to portfolio managers in a two-period relationship. We show that the fiow of funds is a powerful incentive in an asset management contract. We build a binomial moral hazard model to explain the main trade-ofIs in the relationship between fiow, fees and performance. The main assumption is that efIort depend" on the combination of implicit and explicit incentives while the probability distrioutioll function of returns depends on efIort. In the case of full commitment, the investor's relevant trade-ofI is to give up expected return in the second period vis-à-vis to induce efIort in the first período The more concerned the investor is with today's payoff. the more willing he will be to give up expected return in the following periods. That is. in the second period, the investor penalizes observed low returns by withdrawing resources from non-performing portfolio managers. Besides, he pays performance fee when the observed excess return is positive. When commitment is not a plausible hypothesis, we consider that the investor also learns some symmetríc and imperfect information about the ability of the manager to generate positive excess returno In this case, observed returns reveal ability as well as efIort choices exerted by the portfolio manager. We show that implicit incentives can explain the fiow-performance relationship and, conversely, endogenous expected return determines incentives provision and define their optimal leveIs. We provide a numerical solution in Matlab that characterize these results.

Brazilian equity mutual funds: A general outlook based on performance

This dissertation main goal is to overview the Brazilian equity mutual funds returns. We find that active management is not effective for Ibovespa index, since Ibovespa active funds do not outperform the Ibovespa referenced funds. However, for IBrX index, active management do outperform the passive strategy. We found that Sustainable funds returns do not outperform the market, Endowment funds show poor performance, which could indicate strong regulation imposition over endowment funds portfolios. The size of a fund shows positive correlation to mean average returns and alphas. A fund’s lifetime is positively correlated to returns and to alphas, which could be related to more risk-taking by younger managers in order to pursue higher expected returns and, consequently, bigger inflows. Younger funds tend to have lower performance probably because, in taking more risks, they do not perform as expected. In addition, we find that the decreasing trend of the alpha evolution along the time is a sign of the industry decreasing returns of scale, which entails that managers have more difficulties to beat the market portfolio. Top 10s rankings show that funds appear more than once on the top 10s, which shows persistence of funds’ performance. Finally, concerning the deciles and quartiles rankings, the frequency of appearances changes among performance measures. There are measures which, when compared to others, strongly change the top and bottom for the decile and quartile members.

The effect of guia exame’s ratings on the brazilian fund industry: an analysis of net-worth flows

This paper infers the impact the publication “Guia Exame” (the guide) has on the Brazilian fund industry, more specifically on the ability the concerned funds develop on attracting new investment. The impact is measured using the event-study analysis based on the variation of net worth subsequently to the event of being rated, according to the methodology applied by the guide to rank the funds. We used five years of fund ratings according to Guia Exame (2000-2004) and analyzed the changes of these funds’ net worth. We also compared the event amongst different categories of funds. The results found confirm the expected effects according to star rankings and asset manager size in all years.

Liquidez e fluxo de caixa: um estudo teórico sobre alguns elementos que atuam no processo de formação do caixa e na determinação do nível de liquidez de empresas privadas não financeiras

O trabalho procura mapear e interpretar o processo de formação de caixa decompondo e analisando as atividades que contribuem para liberar ou retirar recursos do fluxo de caixa. Procura também avançar no problema da determinação do nível ótimo de liquidez que deve ser mantido pelas empresas.

Testes de estrutura ótima de capital em empresas brasileiras: o efeito de liquidez, desempenho do mercado acionário e assimetria de informação nas decisões de financiamento

Este trabalho busca explorar, através de testes empíricos, qual das duas principais teorias de escolha de estrutura ótima de capital das empresas, a Static Trade-off Theory (STT) ou a Pecking Order Theory(POT) melhor explica as decisões de financiamento das companhias brasileiras. Adicionalmente, foi estudado o efeito da assimetria de informações, desempenho e liquidez do mercado acionário nessas decisões. Utilizou-se no presente trabalho métodos econométricos com dados de empresas brasileiras de capital aberto no período abrangendo 1995 a 2005, testando dois modelos representativos da Static Trade-off Theory (STT) e da Pecking Order Theory(POT). Inicialmente, foi testado o grupo amplo de empresas e, posteriormente, realizou-se o teste em subgrupos, controlando os efeitos de desempenho e liquidez do mercado acionário, liquidez das ações das empresas tomadoras e assimetria de informações. Desta forma, os resultados obtidos são indicativos de que a Pecking Order Theory, na sua forma semi-forte, se constitui na melhor teoria explicativa quanto à escolha da estrutura de capital das empresas brasileiras, na qual a geração interna de caixa e o endividamento oneroso e operacional é a fonte prioritária de recursos da companhia, havendo algum nível, embora baixo, da utilização de emissão de ações. Os estudos empíricos para os subgrupos de controle sugerem que a liquidez do mercado e liquidez das ações das empresas são fatores de influência na propensão das empresas emitirem ações, assim como a assimetria de informação. O desempenho do mercado acionário, com base nos dados analisados, aparenta ter pouca influência na captação de recursos via emissões de ações das empresas, não sendo feito no presente estudo distinções entre emissões públicas ou privadas

Produtividade da mão-de-obra e do capital investido na petrobrás : sua relação com o dimensionamento da força de trabalho

Esta obra pretende demonstrar como evoluem os índices de produtividade da mão-de-obra e do capital investido na PETROBRAS, investigando a relação mantida com o dimensionamento quantitativo e qualitativo da força de trabalho da estatal. índice de produtividade é o resultado da divisão das quantidades produzidas por um trabalho pelos insumos utilizados na consecução desse trabalho, em relação a um determinado período de tempo. A produtividade expressa, portanto, a razão output / input. O aumento da produtividade pode ser causado pela substituição da mão-de-obra por tecnologia aplicada via capital investido, afetando por conseguinte o dimensionamento da força de trabalho. No caso da Petróleo Brasileiro S.A. - PETROBRAS, o autor identificou cinco períodos evolutivos correlatos às curvas de produtividade da estatal: de 1958 a 1964, de 1964 a 1973, de 1973 a 1979, de 1979 a 1991, e após 1991. De 1980 a 1995, a área de Exploração & Produção da companhia triplicou suas produtividades relativas - tanto da mão-de-obra quando do capital investido-, o mesmo não acontecendo nem com a área de Refinação nem com a PETROBRAS holding, que não viram crescer substancialmente suas produtividades relativas da mão-de-obra entre 1980 e 1995, enquanto caíam suas produtividades relativas do capital investido. Quanto às possibilidades futuras de dimensionamento quantitativo e qualitativo do contingente de pessoal, entrevistas realizadas com doze gerentes da empresa revelaram a tendência que aponta para a redução do número de empregados e mudança de seus perfis profissionais, e para a instituição de políticas de concentração e manutenção de pessoal qualificado por treinamento nas atividades-fim da companhia.

La interculturalidade como estratégia competitiva de las organizaciones brasilenãs frente a la globalización

Este estudo aborda o emprego de estratégias interculturais para conseguir competitividade organizacional em diferentes situações, tais como fusões alianças para negócios internacionais, servIços a clientes internacionais e comércio exterior. Em busca desse objetivo, a pesquisa de campo foi realizada em cinco diferentes organizações, entre as quaIs duas são instituições de ensmo, nas quaIs estudantes em comércio e negócios internacional foram entrevistados individualmente e em grupos. Nessa busca por fundamentos para postura educacional e habilidades interculturais, Simón Bolívar foi considerado urna inspiração, em especial devido à sua preocupação com o mútuo entendimento entre as nações latino-americanas, uma questão que está nas raízes de qualquer possibilidade de superar desafios interculturais. Além disso, os ideais daquele reconhecido líder emergem fortemente, quando essas nações estão decididas a estabelecer o MERCOSUL. As conclusões deste estudo não simplesmente mostram que esforços interculturais estão atualmente presentes nas estratégias de gestão e de negócios nas organizações e grupos enfocados, mas também encontra uma orientação, o que em termos fenomenológicos é um sentido voltado á compreensão intercultural, a qual é vista como uma atitude básica para fusões e negócios internacionais serem bem sucedidos.

Modelo para avaliação do custo burocrático do FCVS (Fundo de Compensação de Variações Salariais) : um estudo de caso

In 1964, year of the military coup, the Brazilian government established a housing finance system with the intention of reducing the housing shortage that had been going on for decades. In order to reach this goal, the government created the Housing Finance System (acronym in Portuguese ¿ SFH), a set of rules which intended to set up a regulated market through standardized contracts and compulsory sources of funds. The system survived for some time, due to the state control of prices and salaries in the authoritarian regime. However, the increasing inflationary pressure obliged the government to adopt a populist subsidy policy, which left as a consequence outstanding balances at the end of the contracts that very often exceeded the value of the financed units. The solution adopted was to create a fund to settle these residual balances. Such fund should be capitalized by the government and by compulsory contributions from borrowers and financial institutions. Since the government did not make such contributions, the debt of this fund increased on a yearly basis, reaching around 3,5 % of Brazil¿s GDP in December 31, 2006. Due to the decline of private investments in the housing finance system, this debt concentrated mostly on public and state-owned companies, government agencies and public funds. The outcome of this policy was the Salary Variations Compensation Fund (acronym in Portuguese ¿ FCVS), which has a negative net equity of 76 billion reais and costs 100 million reais per year to be managed, and whose main creditor is the Federal Government itself.

Um Estudo sobre a avaliação da condução do processo de parcerias - o caso Telemar Corporate

The partnerships have become the subject of study as an innovative element in the production management and a strategic option in the entrepreneurial activities that characterize this momentum of great instability due to the globalization of the financial dimension and the opening of captive markets all over the world.The objective of this research was to investigate and evaluate the in-fluence and relevance of the factor process approach among the other critical factors identified for the strategic management of partnerships. In view of the service offer of Telecommunications, mainly in the Case Study of Telemar Corporate, that belongs to the Tele Norte Leste Group S.A. (Telemar) responsible for rendering services to the corporate market. A research was performed in the Diretoria de Produtos Empresariais - DPE, a unit of the Telemar Corporate, analyzing these critical factors in 3 clusters related to the constitution of part-nerships: the definition of the strategic objectives, the quality of the human re-sources applied and the management of the partnership processes. The Theoretical Reference contributed to the definition of contemporary concepts on the management and the classification of the partnerships as well as the identification of the critical factors. The research was methodological and exploratory, using in this Case Study the field search through the employment of interviews and questionnaires in a selected sample. It was possible to identify that among the more relevant critical factors the process approach, is the most influential and relevant for the management of the partnerships at Telemar Corporate. It is succeeded by other factors equally important, such as the definition of objectives and the strategic intention that confirms the initial hypothesis of this study.