Birds of a Feather – Do Hedge Fund Managers Flock Together?
42 Pages Posted: 10 Feb 2016 Last revised: 6 Apr 2021
Date Written: July 17, 2020
Mandatory filings for UK hedge funds suggest that managers having worked at the same prior employer invest more similarly in terms of distances of returns. If they overlapped in employment, increasing the chance of social ties, investments become even more similar. The joint effect accounts for up to two-thirds of the difference in investing behavior. Results are robust to fund and manager level controls, as well as to identification concerns. With controls, the same-employer effect is concentrated in the systematic component (beta) while the overlap effect is concentrated in the idiosyncratic components (alpha and residuals).
Keywords: hedge funds, social ties, networks, abnormal performance
JEL Classification: G11, G20, G23
Suggested Citation: Suggested Citation