Investing in Talents: Manager Characteristics and Hedge Fund Performances

Haitao Li · Xiaoyan Zhang · Rui Zhi Zhao

202 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Financial Markets and Investment Strategies Corporate Finance and Governance Private Equity and Venture Capital

Abstract

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.

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References

1993Common risk factors in the returns on stocks and bonds 1973Risk, Return, and Equilibrium: Empirical Tests 2004Mutual Fund Flows and Performance in Rational Markets 1997Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds 2003Risks and Portfolio Decisions Involving Hedge Funds 2001The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers 2002Mutual Fund Flows and Performance in Rational Markets 2004Hedge Fund Benchmarks: A Risk-Based Approach

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