Abstract
This paper explores how affiliation to financial conglomerates affects asset managers’ access to capital, risk taking, and performance. Focusing on a sample of hedge funds, we find that financialconglomerate-affiliated hedge funds (FCAHFs) have lower flow-performance sensitivity than other hedge funds and that this difference is particularly pronounced during financial turmoil. Arguably, thanks to more stable funding, FCAHFs allow their investors to redeem capital more freely and are able to capture price rebounds. Since investors may value these characteristics, our findings provide a rationale for why financial conglomerate affiliation is widespread, although it slightly hampers performance on average.
