Hedge Fund Flows and Name Gravitas

52 Pages Posted: 23 Mar 2017 Last revised: 20 Nov 2018

See all articles by Juha Joenväärä

Juha Joenväärä

Aalto University School of Business

Cristian Ioan Tiu

University at Buffalo; TIAA Institute

Date Written: August 15, 2018


We document that investors allocate more flows to hedge funds whose names exhibit gravitas -defined as a combination of words from geopolitics and economics, or suggesting power. The economic effects are relatively large: averaging across our models, adding one more word with gravitas to the name of the average fund brings over $300,000 more in quarterly flows. We also document that having a name with gravitas is associated with abnormal negative performance: high name gravitas funds have lower returns, alphas, Sharpe ratios and manipulation-proof performance measures, higher volatilities and maximum drawdowns as well as higher probabilities of extinction than the funds with lower name gravitas. Although we find evidence that investors learn about the true investment abilities of their funds and respond less to gravitas as they do so, the gravitas-chasing behavior survives all these controls and totals more than 5% of the overall assets managed by hedge funds. From the point of view of hedge fund managers, we document that funds with more name gravitas report to fewer databases, suggesting that giving the fund a "good" name serves as an alternative form of marketing. Finally, we show that our results are robust to a generous battery of additional tests, including corrections for potential endogeneity issues or for whether the fund only accepts qualified investors.

Keywords: Hedge funds, Semantic content, Flows

JEL Classification: G11, G14

Suggested Citation

Joenvaara, Juha and Tiu, Cristian Ioan, Hedge Fund Flows and Name Gravitas (August 15, 2018). Available at SSRN: https://ssrn.com/abstract=2939028 or http://dx.doi.org/10.2139/ssrn.2939028

Juha Joenvaara (Contact Author)

Aalto University School of Business ( email )


Cristian Ioan Tiu

University at Buffalo ( email )

238 Jacobs Management Center
Jacobs Hall, North Campus
Buffalo, NY NY 14260
United States
7166453299 (Phone)

TIAA Institute ( email )

8500 Andrew Carnegie Blvd
Charlotte, NC 28262
United States

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