We explore the impact of limited attention by analyzing the performance of hedge fund managers who are distracted by marital events. We find that marriages and divorces are associated with significantly lower fund alpha, during the six-month period surrounding and the two-year period after the event. Busy managers who manage multiple funds and who are not part of a team are more affected by marital transitions. Inattentive managers place fewer active bets relative to their style peers, load more on index stocks, exhibit higher R-squareds with respect to systematic factors, and are more prone to the disposition effect.

ABSTRACT We show that, motivated by sensation seeking, hedge fund managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios, information ratios, and alphas. Moreover, sensation‐seeking managers trade more frequently, actively, and unconventionally, and prefer lottery‐like stocks. We show further that some investors are themselves susceptible to sensation seeking and that sensation‐seeking investors fuel the demand for sensation‐seeking managers. While investors perceive sensation seekers to be less competent, they do not fully appreciate the superior investment skills of sensation‐avoiding fund managers.