Moving to Greener Pastures: Does Hedge Fund Manager Skill Persist Across Asset Classes?

Abstract

Recent theoretical and empirical literature provides evidence of performance persistence in hedge funds. This study investigates whether persistence varies when a specialist FX manager launches a new fund in a different asset class. Previous research has found that when managers switch fund style or launch a subsequent fund, their skill in generating abnormal returns persists in the new styles and funds. Consistent with these findings, our results show that better performing FX hedge fund managers continue to outperform their peers, when they launch new asset class funds, but persistence declines over time.

JEL Classification: F31, G14, G19