Political Cognitive Biases Effects on Fund Managers’ Performance

By Marian Moszoro

Who does a better job in managing money—Democrats or Republicans?

A recent paper of mine—which explores this question using individual partisan contributions and equity hedge fund managers’ performance—received some attention in the media. Here is a link to the paper and to press articles that do a better job than me in explaining the findings:


Chief Investment Officer

How Political Ideology Affects Hedge Fund Performance

An “abnormal” political event can lead to a large disparity in investment performance between Republicans and Democrats, research shows.

By Amy Whyte on July 22, 2016



When politics blinded hedge fund managers

Call it Obama derangement syndrome or call it principled objection to monetary and fiscal policy, but Republican-leaning equity hedge funds got their heads handed to them in 2008 and 2009.

By James Saft on July, 27 2016


Bloomberg View

The Party Politics of Stock-Market Investing

Who does a better job of managing money, Republicans or Democrats? Thanks to a new study, we finally have at least a partial answer.

By Tyler Cowen on August 3, 2016


Canadian Investment Review

How could the U.S. election impact hedge fund returns?

New research shows a link between political ideology and manager decision-making.

By Caroline Cakebread on August 10, 2016


Financial Times, FundFire

Democrat Fund Managers Trounced Republicans After Crisis

By Michael Shagrin on August 15, 2016



Hi Marian -- what are the policy implications of your findings? Are there any real-world reactions?

Hi David,

Thank you for your questions and interest in the article!

The first policy implication is that if ideology can affect the processing of information and performance, partisan contributions and affiliation of hedge fund managers should be subject to mandatory disclosure (analogously to portfolio disclosures mandated by the Dodd-Frank Act).

The second implication---on an investor's standpoint---is that one should check his/her money manager's past performance and to what extend he/she is immune to political biases.

As for real-world reactions to this research, the performance of equity hedge fund managers in normal times is similar, so no abnormal reactions there. To my knowledge, many money managers have read the synopsis of the paper through the media (e.g., Reuters, Bloomberg, FT, Barclay Hedge, and others). In two weeks, we may have another "data point" to test the counter-factual...

All best,


Hey Marian -- Sounds like an interesting problem. How should a manager disclose this information? Party affiliation? Voting record (violates privacy law), or self-declaration? Shall they say what shade of "purple" they are between R red and D blue? What about libertarians?

Further, is there some arbitrage opportunity against Red or Blue portfolios, if a party wins more seats? Will Goddart's Law turn this into a strategic declaration?

No self-declaration or voting record needed: a disclosure of contributions to partisan committees---Democratic, Republican, or other---would suffice.

We found that there is no "Red" or "Blue" portfolios. Only in extreme cases political biases surface and materialize in different portfolios. The best way to hedge against them would be to find "unbiased" money managers (i.e., those not contributing to any party) or to create a "purple" portfolio. In any case, the information on partisan affiliation of money managers, as well as their track record, should be easily available to investors.

Hahaha... not if they donate to SUPERPACs etc. Americans are world leaders in hiding political influence (cf., campaign finance reform and Citizens United).

But nice that you've discovered something for them to hide now ;)

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