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Public hedge funds

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  • Sun, Lin
  • Teo, Melvyn

Abstract

Hedge funds managed by listed firms significantly under-perform funds managed by unlisted firms. The under-performance is more severe for funds with low manager deltas, poor governance, and no manager co-investment, or those managed by firms whose prices are sensitive to earnings news. Notwithstanding the under-performance, listed asset management firms raise more capital, by growing existing funds and launching new funds post listing, and harvest greater fee revenues than do comparable unlisted firms. The results are consistent with the view that, for asset management firms, going public weakens the alignment between ownership, control, and investment capital, thereby engendering conflicts of interest.

Suggested Citation

  • Sun, Lin & Teo, Melvyn, 2019. "Public hedge funds," Journal of Financial Economics, Elsevier, vol. 131(1), pages 44-60.
    • Handle: RePEc:eee:jfinec:v:131:y:2019:i:1:p:44-60
    DOI: 10.1016/j.jfineco.2018.09.004
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    More about this item

    Keywords

    Hedge funds; Asset management; Initial public offering; Agency; Conflicts of interest;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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