Foreign Talent and Hedge Funds
54 Pages Posted: 9 Feb 2022 Last revised: 22 Mar 2022
Date Written: February 4, 2022
We examine the value of skilled foreign labor for hedge funds by leveraging on two natural experiments. We find that hedge funds that secure more H-1B visas in random lotteries deliver higher alphas, Sharpe ratios, and information ratios. Moreover, an unexpected reduction in the H-1B quota undermined the performance of hedge funds that were dependent on H-1B workers. The superior performance of funds with high H-1B allocations can be attributed to highly-educated STEM majors operating systematic strategies. Notwithstanding the valuable skills that foreign workers possess, racial and ethnic homophily induces some fund managers to eschew foreign labor.
Keywords: Foreign labor, H-1B, Visa, Systematic, Quantitative, Race, Ethnicity, Diversity, Homophily, STEM, Education
JEL Classification: G23, J15, J24, J61
Suggested Citation: Suggested Citation