Moving to Greener Pastures : Does Hedge Fund Manager Skill Persist Across Asset Classes?

FX hedge funds have experienced very weak returns and high fund failure rates, as currency predictability decays. The managers of these funds face strong incentives to concentrate on new asset classes, creating a natural experiment to test whether observed manager skill is FX specific, or persists to other asset classes. The best FX hedge fund managers continue to outperform other FX peers who also launch new funds. Investment managerial skill in FX is a strong predictor of performance in the new asset class