Network Centrality and Delegated Investment Performance † Alberto

We document a positive relation between network centrality and risk-adjusted performance in a delegated investment management setting. More connected managers take more portfolio risk and receive higher investor flows, consistent with these managers improving their ability to exploit investment opportunities through their network connections. Greater network connections are shown to be particularly important in reducing the diseconomies-of-scale for large managers who are well-connected. We also use the exogenous merger of two investment consultants, which creates a sudden change in the network connections of the managers they oversee, to provide evidence that a greater number of connections translates into better portfolio performance. †We thank an anonymous referee for many valuable comments and suggestions. We also thank Jonathan Lipkin, Stefan Lundbergh, Michael Melvin, Anastasia Petraki, Arno Riedl, Richard Sias, seminar participants at EDHEC London, HEC Paris, Imperial College, JOIM 2015 conference in La Jolla, Netspar international workshop in Leiden, University of Arizona, the Finance Down Under 2015 conference at University of Melbourne, the 2016 AFA meetings (especially the discussant, Ankur Pareek) and the 2015 SoFiE meetings. We are also grateful to Alan Wilcock and Daniel Hall of BNY Mellon Asset Servicing for providing us with the CAPS pension fund performance data. ‡Smith School of Business, University of Maryland-College Park; Email: [email protected]. §Cass Business School, City University of London; Email: [email protected]. ¶Rady School of Management, University of California at San Diego; Email: [email protected]. kUniversity of Bath School of Management; Email: [email protected]. ⇤⇤Smith School of Business, University of Maryland-College Park; Email: [email protected].