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April 09, 2015 at 09:50 AM
First comes love, then comes alpha – even for hedge fund managers.
A recent study found that hedge fund managers who got married or divorced earned significantly lower fund alpha for several months around those events.
Researchers at the University of Florida and Singapore Management University evaluated the effect of personal events on hedge funds by using monthly net-of-fee returns and assets-under-management data of 15,500 live and 11,261 dead hedge funds reported in Lipper’s TASS hedge fund database and datasets from Morningstar, Hedge Fund Research (HFR) and BarclayHedge from January 1990 to December 2012.
They also hand-collected money managers’ marital records, mainly from Lexis-Nexis court record searches supplemented by Internet searches.
The researchers posited that marital events were largely exogenous ones that distracted fund managers from their investment activities. Their results, they said, validated the view that significant life events obstructed success in the finance field.
They showed that during the six-month period around a marriage, hedge fund alpha fell by 8.5% per annum, and during a similar period around a divorce, fund alpha dropped by 7.4% per annum.
