The Association of Hedge Fund Performance with Manager Location, Domicile, and Choice of Service Provider

Abstract

This article evaluates the association between a manager’s choice of location, domicile, prime broker, auditor, and administrator and fund performance and survival for the period ranging from 2007 to 2011. Mirabile finds that there is a negative association between performance and most location, domicile, and service provider choices during the five-year period from 2007 to 2011. However, this association was reversed in 2008 during the market crisis. During the crisis, managers based in New York, NY, and funds using J.P. Morgan, Goldman, or Morgan Stanley as their prime brokers showed a positive association between performance and these factors, indicating there may be a “put-like” option, valuable during periods of market crisis, embedded in the decision to use a top-tier prime broker or locate in a costly place like New York.

TOPICS: Real assets/alternative investments/private equity, financial crises and financial market history, performance measurement