Hostname: page-component-848d4c4894-wg55d Total loading time: 0 Render date: 2024-05-09T05:15:06.050Z Has data issue: false hasContentIssue false
  • English
  • Français

Investing in Talents: Manager Characteristics and Hedge Fund Performances

Published online by Cambridge University Press:  22 November 2010

Haitao Li ,
Xiaoyan Zhang  and
Rui Zhao
Haitao Li
Affiliation:
Ross School of Business, University of Michigan, 701 Tappan St., Ann Arbor, MI 48109. htli@umich.edu
Xiaoyan Zhang
Affiliation:
Krannert School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47907. zhang654@purdue.edu
Rui Zhao
Affiliation:
BlackRock Inc., 400 Howard St., San Francisco, CA 94105. rui.zhao@blackrock.com
Get access Rights & Permissions [Opens in a new window]

Abstract

Using a large sample of hedge fund manager characteristics, we provide one of the first comprehensive studies on the impact of manager characteristics, such as education and career concern, on hedge fund performances. We document differential ability among hedge fund managers in either generating risk-adjusted returns or running hedge funds as a business. In particular, we find that managers from higher-SAT (Scholastic Aptitude Test) undergraduate institutions tend to have higher raw and risk-adjusted returns, more inflows, and take fewer risks. Unlike mutual funds, we find a rather symmetric relation between hedge fund flows and past performance, and that hedge fund flows do not have a significant negative impact on future performance.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 59 - 82
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Agarwal, V., and Naik, N. Y.. “Risks and Portfolio Decisions Involving Hedge Funds.” Review of Financial Studies, 17 (2004), 63–98.CrossRefGoogle Scholar
Berk, J. B., and Green, R. C.. “Mutual Fund Flows and Performance in Rational Markets.” Journal of Political Economy, 112 (2004), 1269–1295.CrossRefGoogle Scholar
Boyson, N. M. “Why Do Experienced Hedge Fund Managers Have Lower Returns? ” Working Paper, Purdue University (2003).Google Scholar
Boyson, N. M. “Another Look at Career Concerns: A Study of Hedge Fund Managers.” Working Paper, Northeastern University (2004).Google Scholar
Brown, S. J., and Goetzmann, W. N.. “Hedge Funds with Style.” Journal of Portfolio Management, 29 (2003), 101–112.CrossRefGoogle Scholar
Chevalier, J., and Ellison, G.. “Are Some Mutual Fund Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance.” Journal of Finance, 54 (1999a), 875–899.CrossRefGoogle Scholar
Chevalier, J., and Ellison, G.. “Career Concerns of Mutual Fund Managers.” Quarterly Journal of Economics, 114 (1999b), 389–432.CrossRefGoogle Scholar
Fama, E. F., and French, K. R.. “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics, 33 (1993), 3–56.CrossRefGoogle Scholar
Fama, E. F., and MacBeth, J. D.. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy, 81 (1973), 607–636.CrossRefGoogle Scholar
Fung, W., and Hsieh, D. A.. “Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds.” Review of Financial Studies, 10 (1997), 275–302.CrossRefGoogle Scholar
Fung, W., and Hsieh, D. A.. “The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers.” Review of Financial Studies, 14 (2001), 313–341.CrossRefGoogle Scholar
Fung, W., and Hsieh, D.. “Hedge-Fund Benchmarks: Information Content and Biases.” Financial Analysts Journal, 58 (2002), 22–34.CrossRefGoogle Scholar
Fung, W., and Hsieh, D. A.. “Hedge Fund Benchmarks: A Risk-Based Approach.” Financial Analyst Journal, 60 (2004), 65–80.CrossRefGoogle Scholar
Fung, W.; Hsieh, D.; Naik, N.; and Ramadorai, T.. “Hedge Funds: Performance, Risk, and Capital Formation.” Journal of Finance, 63 (2008), 1777–1803.CrossRefGoogle Scholar
Getmansky, M. “The Life Cycle of Hedge Funds: Fund Flows, Size, and Performance.” Working Paper, University of Massachusetts at Amherst (2004).Google Scholar
Getmansky, M.; Lo, A. W.; and Makarov, I.. “An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns.” Journal of Financial Economics, 74 (2004), 529–609.CrossRefGoogle Scholar
Goetzmann, W. N.; Ingersoll, J. E. Jr.; and Ross, S. A.. “High-Water Marks and Hedge Fund Management Contracts.” Journal of Finance, 58 (2003), 1685–1717.CrossRefGoogle Scholar
Grossman, S. J. “Hedge Funds Today: Talent Required, Commentary.” The Wall Street Journal (Sept. 29, 2005), A18.Google Scholar
Kosowski, R.; Naik, N. Y.; and Teo, M.. “Do Hedge Funds Deliver Alpha? A Bayesian and Bootstrap Analysis.” Journal of Financial Economics, 84 (2007), 229–264.CrossRefGoogle Scholar
Mitchell, M., and Pulvino, T.. “Characteristics of Risk and Return in Risk Arbitrage.” Journal of Finance, 56 (2001), 2135–2175.CrossRefGoogle Scholar