Alumni social networks and hedge fund performance: Evidence from China

Abstract

Based on unique data of Chinese private hedge funds, we first construct the “strong alumni” (alumni of the same school and the same major) social networks of private hedge fund managers, and examine the impact of alumni social networks on the performance of hedge funds in China. We build a series of alumni networks using the educational background information of 4734 private hedge funds, and perform an empirical analysis on a sample of 1115 private hedge funds products from 2010 to 2019. Different from previous findings of mutual funds, we find that more central network positions of hedge fund managers are associated with better risk-adjusted fund performance. Hedge fund managers with more central positions conduct more active investment styles and receive lower fund flows.11We use the term “fund flow” to refer to the money flow into hedge funds. Please see the detailed definition in Section 5.4. The results supplement the evidence that information advantages brought by central position in social networks can influence managers' investment styles, thus improve hedge fund performance.