Responsible Hedge Funds

63 Pages Posted: 23 Jun 2020 Last revised: 24 Nov 2021

See all articles by Hao Liang

Hao Liang

Singapore Management University - Lee Kong Chian School of Business; European Corporate Governance Institute (ECGI)

Lin Sun

Fudan University

Melvyn Teo

Singapore Management University - Lee Kong Chian School of Business

Date Written: May 26, 2020

Abstract

Hedge funds that endorse the United Nations Principles for Responsible Investment (PRI) underperform other hedge funds after adjusting for risk but attract greater investor flows, accumulate more assets, and harvest greater fee revenues. Consistent with an agency explanation, the underperformance of PRI signatories is driven by signatories with low ESG exposures and is greater for hedge funds with poor incentive alignment. By exploiting regulatory reforms that enhance stewardship, we provide causal evidence that relates agency problems to signatory underperformance. Our findings suggest that some hedge funds endorse responsible investment to pander to investor preferences.

Keywords: Principles for Responsible Investment, Greenwash, Hedge Funds, Walk the Talk, Agency Problems, Operational Risk, ESG, Stewardship

JEL Classification: G23, Q56

Suggested Citation

Liang, Hao and Sun, Lin and Teo, Melvyn, Responsible Hedge Funds (May 26, 2020). Available at SSRN: https://ssrn.com/abstract=3610627 or http://dx.doi.org/10.2139/ssrn.3610627

Hao Liang

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

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Lin Sun

Fudan University ( email )

220 Handan Road
Shanghai, 200433
China

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)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
909
Abstract Views
3,271
rank
33,700
PlumX Metrics