Investing in Talents: Manager Characteristics and Hedge Fund Performances

41 Pages Posted: 18 Mar 2008

See all articles by Haitao Li

Haitao Li

University of Michigan - Stephen M. Ross School of Business; Cheung Kong Graduate School of Business; Cheung Kong Graduate School of Business

Rui Zhao

BlackRock, Inc.

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 2008

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 generating risk-adjusted returns and flow-chasing-return behaviors among hedge fund investors. In particular, we find that managers from higher-SAT undergraduate institutes tend to have higher raw and risk-adjusted returns, more inflows, and take less risks. Our results provide supporting evidence to some of the assumptions and implications of the rational theory of active portfolio management of Berk and Green (2004). However, in contrast to the results for 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.

Keywords: hedge fund performance, manager characteristics, hedge fund flows

JEL Classification: G23, G11, G12

Suggested Citation

Li, Haitao and Zhao, Rui and Zhang, Xiaoyan, Investing in Talents: Manager Characteristics and Hedge Fund Performances (March 2008). Available at SSRN: https://ssrn.com/abstract=1107050 or http://dx.doi.org/10.2139/ssrn.1107050

Haitao Li

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-615-5475 (Phone)

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Rui Zhao

BlackRock, Inc. ( email )

55 East 52nd Street
New York City, NY 10055
United States
2128105015 (Phone)
2128108764 (Fax)

Xiaoyan Zhang (Contact Author)

Tsinghua University - PBC School of Finance

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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