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Cited by 167Corporate Social Responsibility ReportingSustainable Finance and Green BondsFinancial Markets and Investment Strategies

Responsible Hedge Funds

Open access
Liang, Hao, Sun, Lin, Teo, Melvyn·2022·Review of Finance
DOI 10.1093/rof/rfac028
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Abstract

Hedge funds that endorse the United Nations Principles for Responsible Investment (PRI) underperform other hedge funds after adjusting for risk but attract greater investor flows, accumulate more assets, and harvest greater fee revenues. Consistent with an agency explanation, the underperformance is driven by PRI signatories with low environmental, social, and governance (ESG) exposures and is greater for hedge funds with poor incentive alignment. To address endogeneity, we exploit regulatory reforms that enhance stewardship and show that the ESG exposure and relative performance of signatory funds improve post reforms. Our findings suggest that some hedge funds endorse responsible investment to pander to investor preferences.

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Crossref · 10.1093/rof/rfac028

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Authors
Liang, H., Sun, L., & Teo, M.
Affiliations
  • Singapore Management University (SG)
  • Fudan University (CN)
Corresponding author
Teo, Melvyn
ORCID
Venue
Review of Finance
Publisher
Oxford University Press (OUP)
Published
2022-05-09
Volume
26
Issue
6
Pages
1585-1633
ISSN
  • 1382-6662 (ISSN-L)
  • 1572-3097
  • 1573-692X
DOI
10.1093/rof/rfac028
OpenAlex
W4285147300
Cited by
167
References
8
Citations by year
2026: 32 · 2025: 41 · 2024: 35 · 2023: 32 · 2022: 19 · 2021: 4 · 2020: 3 · 2019: 1
FWCI
23.71
Type
journal article
Language
en
Open access
Licence
Locations
  • European Finance Review (publishedVersion, cc-by)
  • Singapore Management University Institutional Knowledge (InK) (Singapore Management University) (submittedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Funders
  • National Natural Science Foundation of China (71803028)
  • Shanghai Pujiang Program (18PJC013)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
Keywords
hedge funds, responsible investment, fund performance, investor flows, fee-based income, incentive alignment, agency theory, investor preferences

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