Abstract

http://ssrn.com/abstract=1516965
 
 

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Side-by-Side Management of Hedge Funds and Mutual Funds


Tom Nohel


Loyola University of Chicago

Zhi Jay Wang


University of Oregon - Charles H. Lundquist School of Business

Lu Zheng


University of California, Irvine - Paul Merage School of Business

December 2, 2009


Abstract:     
We examine situations where the same fund manager simultaneously manages mutual funds and hedge funds. We refer to this as side-by-side management. We document 344 such cases involving 693 mutual funds and 538 hedge funds. Proponents of this practice argue that it is essential to hire and retain star performers. Detractors argue that the temptation for abuse is high and the practice should be banned. Our analysis based on various performance metrics shows that side-by-side mutual fund managers significantly outperform peer funds, consistent with this privilege being granted primarily to star performers. Interestingly, side-by-side hedge fund managers are at best on par with their style category peers, casting further doubt on the idea that conflicts of interest undermine mutual fund investors. Thus, we find no evidence of welfare loss for mutual fund investors due to exploitation of conflicts of interest.

Number of Pages in PDF File: 58

Keywords: Hedge Funds, Mutual Funds, Conflicts of Interest

JEL Classification: G18, G20

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Date posted: December 4, 2009 ; Last revised: December 8, 2009

Suggested Citation

Nohel, Tom and Wang, Zhi Jay and Zheng, Lu, Side-by-Side Management of Hedge Funds and Mutual Funds (December 2, 2009). Available at SSRN: http://ssrn.com/abstract=1516965 or http://dx.doi.org/10.2139/ssrn.1516965

Contact Information

Tom Nohel
Loyola University of Chicago ( email )
820 North Michigan Avenue
Chicago, IL 60611
United States
312-915-7065 (Phone)
312-915-8508 (Fax)
Zhi Jay Wang (Contact Author)
University of Oregon - Charles H. Lundquist School of Business ( email )
1208 University of Oregon
Eugene, OR 97403-1208
United States
Lu Zheng
University of California, Irvine - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
9498248365 (Phone)
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