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Hedge Funds: Performance, Risk, and Capital Formation
Author(s) -
FUNG WILLIAM,
HSIEH DAVID A.,
NAIK NARAYAN Y.,
RAMADORAI TARUN
Publication year - 2008
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2008.01374.x
Subject(s) - hedge fund , fund of funds , global assets under management , business , alternative beta , open end fund , finance , financial system , capital (architecture) , alpha (finance) , passive management , monetary economics , institutional investor , economics , marketing , corporate governance , archaeology , construct validity , patient satisfaction , market liquidity , history
We use a comprehensive data set of funds‐of‐funds to investigate performance, risk, and capital formation in the hedge fund industry from 1995 to 2004. While the average fund‐of‐funds delivers alpha only in the period between October 1998 and March 2000, a subset of funds‐of‐funds consistently delivers alpha. The alpha‐producing funds are not as likely to liquidate as those that do not deliver alpha, and experience far greater and steadier capital inflows than their less fortunate counterparts. These capital inflows attenuate the ability of the alpha producers to continue to deliver alpha in the future.