Hedge Funds Versus Hedged Mutual Funds: An Examination of Long/Short Funds; A Performance Update

29 Pages Posted: 8 Apr 2019

Date Written: April 6, 2019

Abstract

This paper presents a performance update of those equity long/short mutual funds that were first described and analyzed in “Hedge Funds Versus Hedged Mutual Funds: An Examination of Long/Short Funds” (The Journal of Alternative Investments, Winter 2014), extending that analysis to the period July 2013 - December 2018. The analyses below confirm that these equity long/short mutual funds provide investment exposure similar to leading equity long/short hedge fund indexes. However, in this later time period, these equity long/short mutual funds underperformed the S&P 500 Index and traditional hedge fund indexes. It is further shown that none of the indexes considered in this paper (i.e. the Index of Equity Long/Short Mutual Funds, the HFRI Equity Hedge Fund Index, or the DJ-CS L/S Equity Hedge Fund Index) had positive risk adjusted returns, as measured by alpha. In addition, none of the 26 equity long/short mutual funds with full data for the period July 2013 - December 2018 had positive alpha. Finally, the paper presents data on the lack of performance persistence across these equity long/short mutual funds, analyzes the considerable change in asset sizes of some of these funds, reports on the closure rate of equity long/short mutual funds over this time period, and notes the positive relationship between excess performance over the S&P 500 and equity long/short mutual fund net asset flows.

Keywords: liquid alternative mutual funds, equity long/short mutual funds, mutual funds, hedge funds

JEL Classification: G11

Suggested Citation

McCarthy, David and Wong, Brian, Hedge Funds Versus Hedged Mutual Funds: An Examination of Long/Short Funds; A Performance Update (April 6, 2019). Available at SSRN: https://ssrn.com/abstract=3367511 or http://dx.doi.org/10.2139/ssrn.3367511

David McCarthy (Contact Author)

D.F. McCarthy LLC ( email )

PO Box 129
Stockbridge, MA 01262
United States

Brian Wong

Independent ( email )

No Address Available

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