Practical Applications of Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival

Abstract

Practical Applications In Manager Characteristics and Hedge Fund Returns, Liquidity, and Survival, published in the Fall 2020 issue of The Journal of Alternative Investments, Hyuna Park empirically examines the impact many hedge fund attributes have on fund performance and survival rates. She examines the relationships between manager education variables and hedge fund returns, risk, alpha, size, age, fees, share restrictions, and fund assets’ liquidity. Manager education proxies include graduating from a top university, holding a professional certification, having a PhD, and having a strong alumni network. Whereas previous studies have found that better-educated managers have better returns, they did not control for liquidity. The previous results could be due to an illiquidity premium. Park examines risk-adjusted returns, accounting for liquidity, and finds a relationship between manager education and liquidity of hedge fund shares and the hedge fund’s assets. She also finds certifications and graduating from elite institutions favorably impact the survival rates of hedge funds.