Born After the Volcker Rule: Regulatory Change, Managerial Remuneration and Hedge Fund Performance
European Financial Management
47 Pages Posted: 10 Jan 2022 Last revised: 7 Sep 2023
Date Written: July 29, 3
Substantial remunerative benefits accrue to managers of new hedge funds launched after the implementation of the Volcker Rule if their previous employer is a large US bank. After the Rule, ex-bankers’ funds charge higher management fees and receive more flows as compared with other new hedge funds established during the same period. This phenomenon is related to changes in investor perception of the distribution of skills of new fund managers rather than to the actual differences in skills. Ex-bankers’ funds are indistinguishable from other funds in terms of performance, risk, and liquidation probability, both before and after the Volcker Rule.
Keywords: Volcker Rule, Hedge funds, Ex-US LCFI bankers, Fee structure, Fund flows
JEL Classification: G2, G23, G24, G28
Suggested Citation: Suggested Citation