Does hedge fund manager skill persist across asset classes?

 

If you are a good hedge fund manager in one asset class, does that skill transfer to other asset classes? This is an interesting question on skill persistence. A recent paper finds that good FX manager who transfer some of their time to start other funds outside of the FX market carry with them their trading skill. See "Moving to greener pastures: Does hedge fund manager skill persist across asset classes?"

If you are a good trader and can manage risk, you should have the generalized skill to do well in a different asset class. There is domain knowledge that is needed, and all asset classes are not alike, but there seems to be enough commonality between asset classes to suggest that trading management is transferable. Should you follow the man and not the market? The data says yes so if you want to know whether the new fund in a different asset class will do well look at the original FX fund. It is noted that the switch to other asset classes is timed well with a decline in FX returns associated with the move to other markets. Nevertheless, there is always the question of bandwidth and the ability to scale across a wider set of assets.