Fund managers may eschew financial rewards for the non-pecuniary benefits from investment management. They may be highly focused on leaving a legacy of stellar returns when they retire and prefer to preserve their ability to generate those returns by staying small. Others may prefer to run small firms so as to devote more of their time and energy into investment activities as opposed to managing people. We empirically zero in on such managers by focusing on funds that have delivered superior returns but do not take advantage of their stellar performance track records to grow capital aggressively. We find that such funds generate alphas that are 5.41 percent per year greater than those generated by funds in the same past performance cohort that take advantage of their track records to raise capital. Our findings cannot be explained by size, fee, or redemption term differentials.
hedge funds, performance, alphas, track record
Finance and Financial Management
Hedge Fund Insights
BNPP Hedge Fund Centre
City or Country
Teo, Melvyn. 2013 October. Hedge Fund Managers who Eschew Asset Gathering. Hedge Fund Insights, 2-8.