It's Not What You Know, It's Who You Know

The New York Times has an interesting article entitled "Quantifying the Role of Old-School Ties in Investing":

"A new study circulating through hedge funds and university campuses points to the powerful role that old-school ties play in the world of investing.

"Mutual fund managers invest more money in companies that are run by people with whom they went to college or graduate school than in companies where they have no such connections, the study found. The investments involving school ties, on average, also do significantly better than other investments.

"The authors of the study offer two possible explanations — one benign and one decidedly not. Fund managers may simply know more about their old classmates, including which ones are likely to make good executives. The alternate explanation is that those executives may be passing along inside information to the fund managers.

"The researchers do not take a position about which explanation is more likely."

The rest of the article makes for a good read if you're interested.