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Publications [#355499] of David A. Hsieh

Journal Articles

  1. Fung, W; Hsieh, D; Naik, N; Teo, M, Hedge fund franchises, Management Science, vol. 67 no. 2 (February, 2021), pp. 1199-1226 [doi]
    (last updated on 2021/10/18)

    We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. Motivated by the aforementioned spillover effects, first funds outperform follow-on funds, after adjusting for risk. Consistent with the agency view, greater incentive alignment moderates the performance differential between first and follow-on funds. Moreover, multiple-product firms underperform single-product firms but harvest greater fee revenues, thereby hurting investors while benefitting firm partners. Investors respond to this growth strategy by redeeming from first funds of firms with follow-on funds that do poorly. Empirically, the multiple-product firm has become the dominant business model for the hedge fund industry.

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