Birds of a Feather Do Hedge Fund Managers Flock Together?

Using a novel data set, we construct a network of hedge fund managers based on past employment. Employment in the same industry and employment in the same firm lead to more similar investment behavior in terms of systematic risk (beta), abnormal performance (alpha), and residual returns, explaining about a quarter of the differences. Employment at the same firm at the same time affects only residual returns. Results are robust to fund and manager level controls, as well as to endogeneity concerns. More connected funds perform better, and prior experience in pension funds and banks aids performance.