We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. While first funds outperform follow-on funds, the superior performance of the former attenuates following the launch of the second fund. Multiple-product firms underperform single-product firms, but harvest greater fee revenues. Consequently, the multiple-product firm has become the dominant business model in the hedge fund industry.
Hedge funds, Franchise, Agency Problems, Multiple-product
Finance | Finance and Financial Management
2013 European Finance Association Meetings
City or Country
FUNG, Bill; HSIEH, David; NAIK, Narayan; and TEO, Song Wee Melvyn.
Growing the asset management franchise: Evidence from hedge funds. (2013). 2013 European Finance Association Meetings. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5327
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