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

See all articles by Michael Bowe

Michael Bowe

University of Manchester

Olga Kolokolova

Lancaster University Management School

Lijie Yu

The University of Manchester - Alliance Manchester Business School

Date Written: July 29, 3

Abstract

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

Bowe, Michael and Kolokolova, Olga and Yu, Lijie, Born After the Volcker Rule: Regulatory Change, Managerial Remuneration and Hedge Fund Performance (July 29, 3). European Financial Management, Available at SSRN: https://ssrn.com/abstract=4002598 or http://dx.doi.org/10.2139/ssrn.4002598

Michael Bowe

University of Manchester ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 306 3407 (Phone)
+44 161 275 4023 (Fax)

Olga Kolokolova

Lancaster University Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Lijie Yu (Contact Author)

The University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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