Do Absolute Return Mutual Funds Have Absolute Returns?
Bradford D. Jordan
University of Kentucky - Gatton College of Business and Economics
Christopher P. Clifford
University of Kentucky
Timothy B. Riley
U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis
July 6, 2012
Journal of Investing, 22 (4), 2013, 23-40
We study the universe of absolute return mutual funds and find no evidence they deliver positive alpha. Additionally, these funds can have significant factor exposures. Compared to ordinary equity funds, absolute return funds have much higher fees and turnover. They perform worse than their hedge fund counterparts. Overall, our results indicate that investors seeking absolute returns using mutual funds are likely to be disappointed.
Keywords: Absolute Returns, Market Neutral, Alpha, Mutual Funds, Low Volatility
Date posted: February 18, 2012 ; Last revised: November 29, 2013
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