Capital Flows and Hedge Fund Regulation
Douglas J. Cumming
York University - Schulich School of Business
State University of New York at Albany - School of Business & Center for Institutional Investment Management
September 1, 2008
3rd Annual Conference on Empirical Legal Studies Papers
This paper introduces a cross-country law and finance analysis of the flow-performance relationship for hedge funds. The data indicate that distribution channels in the form of private placements and wrappers mitigate the impact of performance on fund flows. Distribution channels via investment managers and fund distribution companies enhance the impact of performance on fund flows. Funds registered in countries which have larger minimum capitalization requirements for funds have higher levels of capital flows. Funds registered in countries which restrict the location of key service providers have lower levels of capital flows. Further, offshore fund flows and calendar effects evidenced in the data are consistent with tax factors influencing fund flows. Our findings are robust to Heckman-selection effects for offshore registrants, among other robustness checks.
Number of Pages in PDF File: 35
Keywords: Flow, Performance, Hedge Funds, Regulation, Law and Finance
JEL Classification: G23, G24, G28, K22
Date posted: April 16, 2008 ; Last revised: October 21, 2009
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