This paper examines the agency conflict between mutual fund investors and fund companies, focusing on the incentives that drive mutual funds to adjust their portfolio riskiness. The authors use a semiparametric model to estimate the flow-performance relationship for growth and growth and income funds over the 1982-1992 period. They find that the relationship is nonlinear, with the sensitivity and shape of the relationship varying depending on the fund's age. The study also reveals that mutual funds alter their portfolio riskiness between September and December, consistent with the identified risk incentives. The analysis suggests that funds are motivated to increase or decrease risk based on their year-to-date performance, with younger funds showing more sensitivity to recent returns. The findings provide insights into how mutual funds respond to incentives and highlight the importance of understanding consumer behavior in the mutual fund industry.This paper examines the agency conflict between mutual fund investors and fund companies, focusing on the incentives that drive mutual funds to adjust their portfolio riskiness. The authors use a semiparametric model to estimate the flow-performance relationship for growth and growth and income funds over the 1982-1992 period. They find that the relationship is nonlinear, with the sensitivity and shape of the relationship varying depending on the fund's age. The study also reveals that mutual funds alter their portfolio riskiness between September and December, consistent with the identified risk incentives. The analysis suggests that funds are motivated to increase or decrease risk based on their year-to-date performance, with younger funds showing more sensitivity to recent returns. The findings provide insights into how mutual funds respond to incentives and highlight the importance of understanding consumer behavior in the mutual fund industry.