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Study explores how divorce can affect a money manager's performance

To many people, the world of hedge fund management may seem arcane, insular and highly exclusive. While this is perhaps true to a certain degree, it's important to remember that those who occupy these high-paying, powerful positions are human beings and therefore not immune to feelings of real emotional turmoil, particularly where divorce is concerned.

By way of illustration, consider a recently published study by researchers at the University of Florida and the Singapore Management University examining the impact of divorce on the performance of hedge fund managers.

As part of the study, the researchers gathered public divorce data from 13 states (including Texas), as well as hedge fund return records from a variety of financial databases covering 1994 to 2012.

Based on the resulting sample size of 76 hedge fund manager divorces, the researchers determined the following:

  • During the three months before and the three months after their divorce, hedge fund managers saw their performance drop by 4.3 percentage points in comparison with their pre-divorce performance.
  • During the two years after their divorce, hedge fund managers saw their performance drop by 2.3 percentage points per year in comparison with their pre-divorce performance.

"We find that money managers significantly underperform during a divorce," concludes the paper.

As you might guess, critics have already spoken out against the study for a multitude of reasons, the most popular being the study's small sample size. Indeed, these critics point out that the study includes no data from New York City, the home base for many hedge fund managers and arguably the world's largest financial center, or other major U.S. financial hubs such as Boston.

It will be interesting to see what direction the researchers will take going forward. For example, they have mentioned exploring the possible impact of divorce on the performance of mutual fund managers and private-equity fund managers.

If you would like to learn more about your rights, your options and your potential obligations as they relate to high-asset divorce, consider speaking with an experienced legal professional as soon as possible.

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