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
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: Suggested Citation