Life Cycle Performance of Hedge Fund Managers
Posted: 7 Dec 2022
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: Suggested Citation