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Do Absolute Return Mutual Funds Have Absolute Returns?

Posted: 18 Feb 2012 Last revised: 29 Nov 2013

Bradford D. Jordan

University of Kentucky - Gatton College of Business and Economics

Christopher P. Clifford

University of Kentucky

Timothy B. Riley

University of Arkansas - Department of Finance

Date Written: July 6, 2012

Abstract

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

Suggested Citation

Jordan, Bradford D. and Clifford, Christopher P. and Riley, Timothy B., Do Absolute Return Mutual Funds Have Absolute Returns? (July 6, 2012). Journal of Investing, 22 (4), 2013, 23-40. Available at SSRN: https://ssrn.com/abstract=2007132 or http://dx.doi.org/10.2139/ssrn.2007132

Bradford D. Jordan

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-4887 (Phone)
859-257-9688 (Fax)

Christopher P. Clifford

University of Kentucky ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States
859-257-3850 (Phone)

Timothy Brandon Riley (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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