Eponymous Hedge Funds

Abstract

We examine if eponymy in the hedge fund industry, i.e., naming a fund after the founder/manager, is associated with managers signaling their ability and/or ethical behavior. Our results are consistent with the latter, i.e., eponymous managers are neither skilled nor outperform their non-eponymous peers but exhibit lower operational and fraud risks. If eponymous funds commit regulatory violations and breach investors’ trust, they receive lower flows despite performing well. However, they receive higher flows if they do not violate. Our findings suggest that eponymy serves as a useful signal to investors who value a fund manager's ethical behavior besides performance.

Keywords: Eponymy, hedge funds, performance, signaling, reputation, trust, ethics, integrity.

JEL Classification: G23, G40, G41