Abstract

http://ssrn.com/abstract=967788
 
 

References (63)



 
 

Citations (8)



 


 



Onshore and Offshore Hedge Funds: Are They Twins?


George O. Aragon


Arizona State University (ASU) - Finance Department

Bing Liang


University of Massachusetts at Amherst - Department of Finance & Operations Management; China Academy of Financial Research (CAFR)

Hyuna Park


Minnesota State University

March 14, 2008


Abstract:     
Contrary to offshore hedge funds, US-registered (“onshore”) funds are subject to strict marketing prohibitions, accredited investor requirements, limited number of investors, and tax disadvantage. We exploit this difference to test predictions about organizational design, capital flow, and fund performance. We find that onshore funds impose stronger share restrictions such as a lockup provision than offshore funds to deter redemptions, but hold more liquid assets to reduce the cost of liquidity- motivated trading. Our results show that capital flows are less sensitive to past performance in onshore funds than in offshore funds due to regulation on advertising, and the flow sensitivity difference affects performance. Liquidity-adjusted alpha is positive and significant (0.94% per month) only for stand-alone onshore funds that have not been affected by excess capital flows from offshore investors through a master-feeder structure.

Number of Pages in PDF File: 42

Keywords: offshore hedge funds, lock-up provision, liquidity risk, master-feeder structure

JEL Classification: G11, G12, G23, G32

working papers series


Download This Paper

Date posted: March 6, 2007 ; Last revised: January 27, 2011

Suggested Citation

Aragon, George O. and Liang, Bing and Park, Hyuna, Onshore and Offshore Hedge Funds: Are They Twins? (March 14, 2008). Available at SSRN: http://ssrn.com/abstract=967788 or http://dx.doi.org/10.2139/ssrn.967788

Contact Information

George O. Aragon
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
Bing Liang (Contact Author)
University of Massachusetts at Amherst - Department of Finance & Operations Management ( email )
Amherst, MA 01003
United States
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Hyuna Park
Minnesota State University ( email )
150 Morris Hall
Mankato, MN 56001
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,923
Downloads: 773
Download Rank: 16,348
References:  63
Citations:  8
People who downloaded this paper also downloaded:
1. Can Hedge Funds Time Market Liquidity?
By Charles Cao, Yong Chen, ...

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.406 seconds