Abstract

http://ssrn.com/abstract=622521
 
 

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Sifting through the Wreckage: Lessons from Recent Hedge-Fund Liquidations


Andrew W. Lo


Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER)

Mila Getmansky Sherman


University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance

Shauna X. Mei


Massachusetts Institute of Technology (MIT) - Sloan School of Management


Journal of Investment Management, 4th Quarter, 2004

Abstract:     
We document the empirical properties of a sample of 1,765 funds in the TASS Hedge Fund database from 1994 to 2004 that are no longer active. The TASS sample shows that attrition rates differ significantly across investment styles, from a low of 5.2% per year on average for convertible arbitrage funds to a high of 14.4% per year on average for managed futures funds. We relate a number of factors to these attrition rates, including past performance, volatility, and investment style, and also document differences in illiquidity risk between active and liquidated funds. We conclude with a proposal for the U.S. Securities and Exchange Commission to play a new role in promoting greater transparency and stability in the hedge-fund industry.

Number of Pages in PDF File: 44

Keywords: Hedge funds, risk management, liquidity

JEL Classification: G12, G20, G33

Accepted Paper Series





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Date posted: November 22, 2004  

Suggested Citation

Lo, Andrew W. and Sherman, Mila Getmansky and Mei, Shauna X., Sifting through the Wreckage: Lessons from Recent Hedge-Fund Liquidations. Journal of Investment Management, 4th Quarter, 2004. Available at SSRN: http://ssrn.com/abstract=622521

Contact Information

Andrew W. Lo (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main Street
E62-618
Cambridge, MA 02142
United States
617-253-0920 (Phone)
781 891-9783 (Fax)
HOME PAGE: http://web.mit.edu/alo/www
Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)
Stata Center
Cambridge, MA 02142
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Mila Getmansky Sherman
University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance ( email )
Amherst, MA 01003-4910
United States
Shauna X. Mei
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
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