Do mutual funds lose talent to hedge funds? Evidence from China

Xin Hong, Di Kang and Zhibin Wang

International Review of Economics & Finance, 2021, vol. 75, issue C, 679-689

Abstract: This paper examines the effect of rapid expansion of the hedge fund industry on mutual fund managerial turnovers. Deuskar et al. (2011) find that mutual funds retain skilled managers by offering side-by-side arrangements. We find that talented fund managers tend to leave mutual funds and establish their own hedge funds when side-by-side arrangements are not feasible. Mutual fund returns and flows decrease if their managers leave mutual funds to establish hedge funds, especially when the hedge fund industry is growing rapidly and performing well. Both institutional and retail investors react to this managerial turnover by reducing net flows.

Keywords: Mutual funds; Hedge funds; Managerial turnover (search for similar items in EconPapers)
JEL-codes: G12 G20 G23 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:75:y:2021:i:c:p:679-689

DOI: 10.1016/j.iref.2021.04.030

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