Life Cycle Performance of Hedge Fund Managers

Posted: 7 Dec 2022

See all articles by Rose Ruoxi Huang

Rose Ruoxi Huang

Shenzhen Oriental Harbor Investment Management Co. Ltd.

Elaine Yongshi Jie

City University of Hong Kong (CityU) - Department of Economics and Finance

Yue Ma

City University of Hong Kong (CityU) - Department of Economics & Finance

Date Written: November 10, 2022

Abstract

We study the life cycle performance of hedge fund managers. We are the first to find that hedge fund managers have a life cycle relationship between their work experience and performance. In the early years of their profession, fund managers work hard to build up their expertise. As a result, they exhibit an improving performance. But as their performance steadily ascends, the improvement of the performance is at a decelerating rate as their effort on their jobs is lessened. The performance of an average fund manager usually peaks around 5 years and then begins to deteriorate afterwards. We also find that fund managers with postgraduate degrees have a Sharpe ratio 9.2% higher than their peers without postgraduate degrees and female fund managers have a Sharpe ratio 17.5% above their male peers. Fund managers working at financial centers outperform their peers at non-financial centers. In a natural experiment setting, we find that the stock market crash had a permanent negative impact on the life cycle performance of fund managers, resulting in a 14.7% decline in the Sharpe ratio.

Keywords: Life cycle performance, Hedge fund managers, Work experience, Financial center

JEL Classification: G11, G23, G40, G41

Suggested Citation

Huang, Rose Ruoxi and Jie, Elaine Yongshi and Ma, Yue, Life Cycle Performance of Hedge Fund Managers (November 10, 2022). Available at SSRN: https://ssrn.com/abstract=4288472

Rose Ruoxi Huang

Shenzhen Oriental Harbor Investment Management Co. Ltd.

Elaine Yongshi Jie

City University of Hong Kong (CityU) - Department of Economics and Finance

Yue Ma (Contact Author)

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/yuema24

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