Mutual funds face the risk of withdrawals if they perform poorly in the short term, which

encourages manager myopia. We show that fund families can insulate managers from

this funding pressure via compensation tied to long-term fund performance. Managers

with long-horizon contracts are more likely to undertake long-term investments and

outperform their constrained peers. Since long-horizon pay does not shut off the

funding pressure, it simply insulates the manager from it; not all families can offer these

contracts. Long-horizon contracts are more prevalent in families that cater to patient

investors and have more resources to buffer liquidity shocks.