Is There a Cost to Transparency?
University of California, Irvine - Paul Merage School of Business
Rajesh K. Aggarwal
April 14, 2011
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
Date posted: April 25, 2011