Public Hedge Funds
46 Pages Posted: 12 Dec 2016 Last revised: 2 Nov 2017
Date Written: December 10, 2016
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: Suggested Citation