Do Absolute Return Mutual Funds Have Absolute Returns?
Posted: 18 Feb 2012 Last revised: 29 Nov 2013
Date Written: July 6, 2012
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
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