Abstract

http://ssrn.com/abstract=778124
 
 

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Hedge Funds: Performance, Risk, and Capital Formation


William Fung


London Business School

David A. Hsieh


Duke University - Fuqua School of Business; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Tarun Ramadorai


University of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance; Centre for Economic Policy Research (CEPR)

Narayan Y. Naik


London Business School - Institute of Finance and Accounting

August 1, 2008

The Journal of Finance, Vol. LXIII, No. 4, August 2008

Abstract:     
We use a comprehensive data set of funds-of-funds to investigate performance, risk, and capital formation in the hedge fund industry from 1995 to 2004. While the average fund-of-funds delivers alpha only in the period between October 1998 and March 2000, a subset of funds-of-funds consistently delivers alpha. The alpha-producing funds are not as likely to liquidate as those that do not deliver alpha, and experience far greater and steadier capital inflows than their less fortunate counterparts. These capital inflows attenuate the ability of the alpha producers to continue to deliver alpha in the future.

Number of Pages in PDF File: 44

Keywords: hedge funds, funds-of-funds, performance, alpha, survival, flows, capacity constraints

JEL Classification: G11, G12, G23

Accepted Paper Series


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Date posted: August 16, 2005 ; Last revised: July 11, 2011

Suggested Citation

Fung, William and Hsieh, David A. and Ramadorai, Tarun and Naik, Narayan Y., Hedge Funds: Performance, Risk, and Capital Formation (August 1, 2008). The Journal of Finance, Vol. LXIII, No. 4, August 2008. Available at SSRN: http://ssrn.com/abstract=778124

Contact Information

William (Bill) Fung
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
David Arthur Hsieh
Duke University - Fuqua School of Business ( email )
Department of Finance
Box 90120
Durham, NC 27708-0120
United States
919-660-7779 (Phone)
919-660-7961 (Fax)
Duke University - Department of Economics ( email )
Durham, NC 27708-0204
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tarun Ramadorai (Contact Author)
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 278 816 (Phone)
+44 1865 288 805 (Fax)
HOME PAGE: http://www.tarunramadorai.com
University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )
Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Narayan Y. Naik
London Business School - Institute of Finance and Accounting ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 (Phone)
+44 20 724 3317 (Fax)
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