Is There a Cost to Transparency?

Abstract:     
This is the first paper that directly tests the cost of transparency. More precisely, we examine whether a willingness to offer transparency to investors is beneficial or costly in terms of hedge fund returns. We measure a fund’s willingness to offer transparency by whether it accepts managed accounts, which are directly controlled by investors. Overall, we find no evidence that a willingness to offer private transparency harms fund returns. In addition, there is no support for concerns that managers offering transparency suffer from selection bias.

Number of Pages in PDF File: 36

Keywords: hedge funds, transparency, managed accounts, performance evaluation, fraud

JEL Classification: G11, G23, G32

working papers series