The Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds

55 Pages Posted: 24 Apr 2015 Last revised: 10 Jun 2020

See all articles by Juha Joenväärä

Juha Joenväärä

Aalto University School of Business

Robert Kosowski

Imperial College Business School; CEPR (Centre for Economic Policy Research)

Multiple version iconThere are 3 versions of this paper

Date Written: June 06, 2020

Abstract

This paper examines the effect of regulatory constraints on fund performance and risk by comparing conventional and UCITS hedge funds. Using a matching estimator approach, we estimate the indirect cost of UCITS regulation to be between 1.06% and 4.05% per annum in terms of risk-adjusted returns. These performance differences are likely to stem from UCITS constraints such as those governing eligible assets, diversification, and short selling, and cannot be explained by differences in redemption terms or level of leverage. We confirm that our performance results are not driven by management company characteristics, fund manager characteristics or unobserved confounder bias.

Keywords: hedge fund performance, mutual fund performance, managerial skill, regulation, constraints

JEL Classification: G11, G12, G23

Suggested Citation

Joenvaara, Juha and Kosowski, Robert, The Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds (June 06, 2020). Available at SSRN: https://ssrn.com/abstract=2598012 or http://dx.doi.org/10.2139/ssrn.2598012

Juha Joenvaara (Contact Author)

Aalto University School of Business ( email )

Finland

Robert Kosowski

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
+442075943294 (Phone)

HOME PAGE: http://www3.imperial.ac.uk/people/r.kosowski

CEPR (Centre for Economic Policy Research) ( email )

London
United Kingdom

HOME PAGE: http://www.cepr.org/

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