Higher risk, lower returns: What hedge fund investors really earn
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Table 3 Portfolio buy-and-hold and dollar-weighted returns 1980-2008 Panel A: Portfolio returns for all funds
Panel B: Portfolio returns by investment vehicles
Notes: The only restriction for inclusion in the portfolio is that hedge funds have to have at least 10 monthly capital flows over the life of the fund. Fund of funds is an investment fund that invests in other (hedge) funds. CPO (Commodity Pool Operator) is an individual or firm which operates a commodity pool for the purpose of trading commodity futures or option contracts. CTA (Commodity Trading Advisor) is any person who, directly or indirectly advises others as to the advisability of buying or selling commodity futures or option contracts. * Backfilled years are years before each fund started reporting to the database. For each fund in Lipper TASS database, we eliminate all returns prior to the start-of-reporting date. Since the start-of-reporting date information is not available for funds in CISDM database, we exclude all CISDM observations. † Bootstrap test of significance, see text and Appendix B for more detail. Table 4 Comparing dollar-weighted returns to various benchmark returns
Notes: Panel A Dollar-weighted return is the portfolio dollar-weighted return. S&P 500 return is the annualized value-weighted return of the S&P 500 index (including dividends). Risk free rate is the annualized return of one-month US Treasury bill. Dollar-weighted S&P 500 return is a benchmark dollar-weighted return using the capital flow patterns of hedge fund investors and the value-weighted returns of the S&P 500 index. This provides a benchmark return for hedge fund investors, if they had invested in the S&P 500 with the same capital flow patterns. Panel B The seven-factors include two equity-based risk factors (i.e. excess return on the S&P 500 index and the spread between the Wilshire small and large cap returns), two bond market based risk factors (i.e. changes in 10 year treasury yields, yield spread between the 10 year treasury bonds and the Moody’s Baa bonds) and three investment style factors. The risk-adjusted buy-and-hold return is computed using a fund level time-series regression, where the regression is estimated every month using the past 24 monthly returns to allow factor loadings to vary over time. See Section 3.2 and Appendix C for more details. Table 5 Fund characteristics and dollar-weighted returns, hedge funds only 1980-2008 Panel A: Portfolio returns by fund size (N=7,379)
Panel B: Portfolio returns by previous 2 year's volatility of buy-and-hold return quintiles (N=5,973)
Panel C: Portfolio returns by previous 2 year’s volatility of scaled capital flows (N= 5,973)
Notes: Panel A ranks all funds at the beginning of each year based on prior year’s average asset-under-management and rebalanced into quintiles. After portfolios are formed each year, value-weighted monthly returns are calculated for each quintiles and annualized. Panel B ranks all funds at the beginning of each year based on volatility of previous 2 year’s buy-and-hold returns and annually rebalances into quintiles. Panel C ranks all funds at the beginning of each year based on volatility of previous 2 year’s % capital flow and rebalanced into quintiles. % Capital flowt = {AUMt-1*(1+returnt) – AUMt}/AUMt-1. Table 6 Contractual provisions and dollar-weighted returns, hedge funds only 1980-2008
Panel B: Portfolio returns by contractual provisions restricting investor’s capital
Notes: Panel A ranks all funds based on previous year’s total management fees (as a % of AUM) and rebalances annually into quintiles. Total management fees are defined as the sum of incentive fees and asset management fees. Incentive fees are calculated based on percentage of monthly returns where months with negative returns are assumed to have zero incentive fees. Asset management fees are calculated on a monthly basis as a percentage of the beginning asset under management value. Panel B ranks all funds based on various contractual provisions restricting investors’ capital. Redemption periods are frequencies in which investors are allowed to withdraw their invested capital. Lockups are provisions restricting investors from redeeming any shares for a certain period after the initial investment. Lock up periods of a typical hedge fund ranges from 1 to 5 years, where most fund have a lockup period of less than 3 years. † Randomization is used to test the null hypothesis that the buy-and-hold return is equal to the dollar-weighted returns. See test and Appendix B for more details. Directory: accounting accounting -> Spring 2009 Newsletter jmu's cpa exam Boot Camp accounting -> Accounting 432/732 Outline—Chapter 1 accounting -> Messod Daniel Beneish accounting -> Accounting Montgomery College Programs Accounting Certificate: 167; Business A. A.: 006 accounting -> Revenue Recognition and sab 101 accounting -> Clasify the following items as an operating, investing, or financing activity. Assume all items involve cash accounting -> John Gillingham, All Rights Reserved, 2015 For educational purposes only accounting -> Creation and Segmentation of the Euronext Stock Exchange and Listed Firms' Liquidity and Accounting Quality: Empirical Evidence accounting -> Chapter three Download 343.65 Kb. Share with your friends:
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