Are Hedge Funds Registered in Delaware Different?

46 Pages Posted: 16 May 2013 Last revised: 2 Dec 2014

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Na Dai

SUNY at Albany - School of Business

Sofia Johan

Florida Atlantic University - Finance; University of Aberdeen; Tilburg Law and Economics Center (TILEC)

Date Written: December 2014

Abstract

Delaware hedge funds exhibit significant differences in contractual structure in terms of higher management and incentive fees. Delaware funds are more likely to use high watermark provisions and less likely to invest their personal capital. Both the redemption notice periods and lock up periods are significantly longer for Delaware hedge funds. While Delaware hedge funds do not outperform or underperform funds registered elsewhere, fund flows are more sensitive to Delaware funds’ prior performance and Delaware funds are more likely to be liquidated due to poor performance. Further, Delaware funds are more likely to increase risk after poor absolute performance.

Keywords: Hedge Funds, Delaware, Law and Finance

JEL Classification: G23, G24, G28, K22

Suggested Citation

Cumming, Douglas J. and Dai, Na and Johan, Sofia A., Are Hedge Funds Registered in Delaware Different? (December 2014). Available at SSRN: https://ssrn.com/abstract=2265663 or http://dx.doi.org/10.2139/ssrn.2265663

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Na Dai (Contact Author)

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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