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Are hedge fund managers skilled?

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  • Kooli, Maher
  • Stetsyuk, Ivan

Abstract

This study measures the skill of hedge fund (HF) managers by calculating the value added that they extract from capital markets. Applying bootstrapping to control for luck, we find that HF managers are skilled, with the magnitude of the value added depending on the benchmark. Compared to the Vanguard S&P 500 Index Fund and a set of eight Vanguard index funds, HF managers add on average $3.24 million per year and $2.88 million per year, respectively, although these values were higher before the financial crisis of 2007–2008 than afterwards. Finally, we find no evidence that HF managers share this value added with their investors.

Suggested Citation

  • Kooli, Maher & Stetsyuk, Ivan, 2021. "Are hedge fund managers skilled?," Global Finance Journal, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:glofin:v:49:y:2021:i:c:s104402832030274x
    DOI: 10.1016/j.gfj.2020.100574
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    3. Ali, Sara & Badshah, Ihsan & Demirer, Riza, 2022. "Value-at-risk and the cross section of emerging market hedge fund returns," Global Finance Journal, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Hedge funds; Manager skill; Value added; Alpha; Bootstrap;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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