Hedge fund hold ’em

Hedge fund managers who do well in poker tournaments have better fund performance. This effect is stronger for tournaments with more entrants, larger buy-ins, larger cash prizes, and for managers who place higher or win multiple tournaments. After tournament wins, net flows to the manager’s fund inc...

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Bibliographic Details
Published in:Journal of financial markets (Amsterdam, Netherlands) Netherlands), 2022-01, Vol.57, p.100616, Article 100616
Main Authors: Lu, Yan, Mortal, Sandra, Ray, Sugata
Format: Article
Language:English
Subjects:
Alpha erosion
Hedge funds
Investor flows
Poker
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Summary:Hedge fund managers who do well in poker tournaments have better fund performance. This effect is stronger for tournaments with more entrants, larger buy-ins, larger cash prizes, and for managers who place higher or win multiple tournaments. After tournament wins, net flows to the manager’s fund increase significantly. These increases are higher for tournaments with media coverage, when the tournament win is bigger, and for more prestigious tournaments. Along with higher net flows, fund alpha also decreases following the tournament win. Given this, hedge fund investors would be better off investing in an otherwise similar manager without poker tournament success. •Hedge fund managers who do well in poker tournaments have significantly better fund performance.•Our results suggest poker skills are correlated with fund management skills.•After a manager wins a poker tournament, flows to the manager's fund increase and fund alpha decreases significantly.•Decreasing returns to scale or distractions correlated with inflows erode the informativeness of the poker win signal.
ISSN:1386-4181
1878-576X
DOI:10.1016/j.finmar.2020.100616