Manager Alpha

Manager Alpha

Manager Alpha

Marc Gerritzen

University of Konstanz – Department of Economics

October 13, 2015

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write 1603127795RV Capital Co-Investor Letter for the first half ended June 2022. Q2 2022 hedge fund letters, conferences and more Dear Co-Investors,


Is alpha a property of the hedge fund or the individual hedge fund manager? By means of panel regressions on a novel data set, identifying the work histories of individual hedge fund managers, I show that there exist significant managerial fixed effects in abnormal returns. A change in a hedge fund’s management induces structural breaks in abnormal returns and fund flows. The replacement of outperforming managers leads to a deterioration in performance. The past performance of replaced managers inversely relates to future fund flows. Past average performance is the main driver behind the probability of a manager replacement event.

Manager Alpha – Introduction

Traditionally, both practitioners and researchers, focus on the hedge fund when studying properties of returns, as opposed to, articles in the popular media which highlight the individual fund managers.1 What are the ultimate drivers of abnormal returns?

If we adapt the view of a hedge fund as a firm producing a sole good (abnormal returns) we may come up with various different models for the production function. For example, Siegmann, Stefanova, and Zamojski (2012) group hedge funds by their institutional structure (fund details and assets the fund trades in). This renders the institutional setting behind the fund or the fund’s managing company