A Bias-Free Assessment of the Hedge Fund Industry: A New Evaluation of Total Assets, Alphas, and the Flow-Performance Relation

70 Pages Posted: 27 Feb 2020 Last revised: 11 Oct 2023

See all articles by Daniel Barth

Daniel Barth

Board of Governors of the Federal Reserve System

Juha Joenväärä

Aalto University School of Business

Mikko Kauppila

University of Oulu

Russ Wermers

University of Maryland - Robert H. Smith School of Business; European Corporate Governance Institute (ECGI)

Date Written: June 1, 2023

Abstract

We combine data from six leading commercial hedge fund vendor databases with confidential regulatory filings to provide a comprehensive evaluation of hedge fund industry size, performance, and investor flows. We estimate that, as of 2019, the industry managed $6.0 trillion in worldwide net assets, 67% larger than the largest vendor estimate. Funds that report only via regulatory filings exhibit better risk-adjusted performance (“alpha”), stronger performance persistence, and a lower sensitivity of investor flows to past returns, relative to those reporting to vendor databases. Our results suggest that “non-vendor-listed” hedge funds have less fragile capital and higher alphas than publicly-marketed funds.

Keywords: hedge funds, net assets, gross assets, strategy, domicile, returns, flows

JEL Classification: G23, G28

Suggested Citation

Barth, Daniel and Joenvaara, Juha and Kauppila, Mikko and Wermers, Russell R., A Bias-Free Assessment of the Hedge Fund Industry: A New Evaluation of Total Assets, Alphas, and the Flow-Performance Relation (June 1, 2023). OFR WP 20-01, Available at SSRN: https://ssrn.com/abstract=3544181 or http://dx.doi.org/10.2139/ssrn.3544181

Daniel Barth (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Juha Joenvaara

Aalto University School of Business ( email )

Finland

Mikko Kauppila

University of Oulu ( email )

P.O. Box 4600
Oulu FIN-90014, 90570
Finland

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://terpconnect.umd.edu/~wermers/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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