Costs and Benefits of Financial Conglomerate Affiliation: Evidence from Hedge Funds

Costs and Benefits of Financial Conglomerate Affiliation: Evidence from Hedge Funds

Mariassunta Giannetti, Francesco Franzoni

Series number :

Serial Number: 
506/2017

Date posted :

May 01 2017

Last revised :

August 20 2018
SSRN Share

Keywords

  • Hedge Funds • 
  • Financial Conglomerates • 
  • Risk taking

This paper explores how affiliation to financial conglomerates affects asset managers’ access to capital, trading behavior, and performance. Focusing on a sample of hedge funds, we find that financial-conglomerate-affiliated hedge funds (FCAHFs) have lower flow-performance sensitivity than other hedge funds and that this difference is particularly pronounced during financial turmoil.

Arguably, thanks to more stable funding, FCAHFs allow their investors to redeem capital more freely and are able to capture price rebounds. Since investors may value these characteristics, our findings provide a rationale for why financial conglomerate affiliation is widespread, although it slightly hampers performance on average.

View full abstract

Published in

Published in: 
Description: 
Swiss Finance Institute Research Paper No. 15-68 | Swedish House of Finance Research Paper No. 17-7 | Journal of Financial Economics

Authors

Real name:
Francesco Franzoni