This paper establishes an agent-based model to describe the dynamic behaviour

of the financial market with mutual fund managers and investors under two types

of compensation contracts: asset-based fees and performance-based fees, and using

two types of adaptive expectation: trend chaser and contrarian. Our results show

that both of trading strategies of trend chaser and contrarian destabilise the market.

However, trend chasers always trigger significant fluctuations, while contrarian

traders bring along the slight up and down oscillations. The types of compensation

contracts change the behaviour of contrarian traders, but have no influence to trend

chaser. We also find that inertia parameter decrease the stability of market and induce

market price to be underestimated. In particular, the heterogenous analysis

under different compensation contracts shows that asset maximisers dominate the

whole market and produce higher returns, which can be used to explain the current

situation in real market that most of mutual funds choose asset-based contract.

Moreover, the coexistence of two compensation schemes may amplify market fluctuations

and create bubbles.