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Investing in Talents: Manager Characteristics and Hedge Fund Performances

Published online by Cambridge University Press:  22 November 2010

Haitao Li ,
Xiaoyan Zhang  and
Rui Zhao
Haitao Li
Affiliation:
Ross School of Business, University of Michigan, 701 Tappan St., Ann Arbor, MI 48109. htli@umich.edu
Xiaoyan Zhang
Affiliation:
Krannert School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47907. zhang654@purdue.edu
Rui Zhao
Affiliation:
BlackRock Inc., 400 Howard St., San Francisco, CA 94105. rui.zhao@blackrock.com
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Abstract

Using a large sample of hedge fund manager characteristics, we provide one of the first comprehensive studies on the impact of manager characteristics, such as education and career concern, on hedge fund performances. We document differential ability among hedge fund managers in either generating risk-adjusted returns or running hedge funds as a business. In particular, we find that managers from higher-SAT (Scholastic Aptitude Test) undergraduate institutions tend to have higher raw and risk-adjusted returns, more inflows, and take fewer risks. Unlike mutual funds, we find a rather symmetric relation between hedge fund flows and past performance, and that hedge fund flows do not have a significant negative impact on future performance.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 59 - 82
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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