Various studies on the cost structure on the performance of the fund, state that reasonable performance pay will encourage fund managers to work harder to improve fund performance. Golec (1992) study found that fund management fees and income of the fund have a positive correlation. Coval and Moskowitz (2001) found that performance fee in the fund management fee and risk-adjusted return had a positive correlation. Elton et al. (2001) analyzed the impact of performance pay for fund manager portfolio selection. They found that fund managers have performance fees that exhibit better stock picking ability.
Kritzman (1987) pointed out that the fund management fee incentive in equivalent fund, leads investors to the fund manager for a call option, which will lead to the fund manager’s ‘moral hazard’. Grinblatt and Titman (1989) also studied the use of option pricing theory; in which they believe that fund managers can have personal portfolio hedging without any risk obtaining implicitly in the remuneration structure corresponding option value. This will entice fund managers in way contrary to the investor’s willingness to take advantage of this feature to change their management risk level of the portfolio. On the other hand, if they are proved, then for the use of fund managers they can employ a buy and hold strategy or policy in terms of rebalancing, when the poor performance of the punishment exceeds the excellent performance of the award, to avoid the negative effects of risk-sharing incentives.