Hedge Fund Awards: Do Investors and Managers Care, and Should They?

We investigate the impact of hedge fund awards on hedge fund flows, performance, and risk-takingbehavior.Weshow that award winners experience a significant increase in fund flows, but find no evidence that they deliver superior alpha subsequently. Our results are robust when we incorporate difference-in-difference methodology. Meanwhile,fund managers with a feasible chance of winning the award increase fundrisk, suggestingtournament behavior among the top performing managers.We also find increase in investor attention following award announcements by analyzing Google search volume and SEC’s EDGAR log file data. These results expand our understanding of the behaviorof presumably sophisticated investors in the hedge fund industry and managerial incentives that arise in response.