With the rising need for transparency, there are obvious benefits for hedge funds naming their manager. With every benefit, there is also risk and more importantly the cost of that risk.

In the article from the Journal of Financial Economics, “When should firms share credit with employees? Evidence from anonymously managed mutual funds,” we see that in the early 1990’s into 2003 there was an increasing rate of anonymous management within hedge funds. This decision to remain anonymous, like the decision to name management, is entirely strategic and each hedge fund case varies.

Some benefits for investors in naming managers are the increase in joint surplus and positive media for the hedge fund. Hedge fund managers use their credibility to claim credit for the hedge fund, which can increase his or her incentive to perform well. With these benefits also come the costs that may be attached to the firm and the hedge fund manager. In terms of the cost to firms, successful named managers have increased bargaining power. In this, the manager also experiences a great amount of risk.

According to the article previously mentioned, “For fund managers, the route to stardom is generating high returns.” In terms of the current economic climate, it seems that more hedge funds have been leaning towards transparency in order to gain returns.

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