UCLouvain Finance Seminar: Plazzi Alberto

Birds of a Feather – do Hedge Fund Managers Flock Together?

Plazzi Alberto, Swiss Finance Institute

Using mandatory filings on the universe of UK hedge funds, we analyze the effect of managerial networks based on past employment. Employment in the same industry and employment in the same firm lead to more similar investment behavior in terms of systematic risk (beta), abnormal performance (alpha), and residual returns, explaining about a quarter of the differences. Employment at the same firm at the same time affects only residual returns. Results are robust to fund and manager level controls, as well as to endogeneity concerns. More connected funds perform better, and prior experience in pension funds and banks aids performance.

 (co-authored with M. Gerritzen and J. Jackwerth)