Public Hedge Funds

46 Pages Posted: 12 Dec 2016 Last revised: 2 Nov 2017

See all articles by Lin Sun

Lin Sun

Singapore Management University - Lee Kong Chian School of Business

Melvyn Teo

Singapore Management University - Lee Kong Chian School of Business

Date Written: December 10, 2016

Abstract

Hedge funds managed by listed firms significantly underperform funds managed by unlisted firms. The underperformance is more severe for funds with low manager deltas, poor governance, and no manager co-investment, or managed by firms whose prices are sensitive to earnings news. Notwithstanding the underperformance, listed asset management firms raise more capital, by growing existing funds and launching new funds post listing, and harvest greater fee revenues than do comparable unlisted firms. The results are consistent with the view that, for asset management firms, going public weakens the alignment between ownership, control, and investment capital, thereby engendering conflicts of interest.

Keywords: Hedge funds, Initial Public Offering, Agency, Conflicts of interest, Short-termism

JEL Classification: G11, G12, G14, G23

Suggested Citation

Sun, Lin and Teo, Melvyn, Public Hedge Funds (December 10, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2883416 or http://dx.doi.org/10.2139/ssrn.2883416

Lin Sun

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore Management University
Singapore, 178899
Singapore

Melvyn Teo (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828 0735 (Phone)
+65 6822 0777 (Fax)

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