What About Hedge Fund Drawdowns?

9 Pages Posted: 11 Feb 2021

See all articles by Rodney N Sullivan

Rodney N Sullivan

University of Virginia, Darden Graduate School of Business

Date Written: February 10, 2021

Abstract

In this paper, I review hedge fund risk using various commonly used measures including market betas, correlations, and porfolio drawdowns. We see a picture emerge that shows hedge funds have historically hedged a fair degree of systematic market risk, especially in the early years, offering meaningful diverisification benefits to traditional stock/bond portfolios. However, the diversification benefits for investors in hedge funds have since seemingly lessened, even if not altogether eliminated. Most recently, modest benefits bore out for hedge fund investors during the 2020 pandemic, although again much less so than in the earlier years.

Keywords: hedge funds, manager performance, asset pricing, factor analysis, performance attribution

JEL Classification: G00, G11, G12, G14, G15, G23

Suggested Citation

Sullivan, Rodney N, What About Hedge Fund Drawdowns? (February 10, 2021). Darden Business School Working Paper No. 3783426, Available at SSRN: https://ssrn.com/abstract=3783426 or http://dx.doi.org/10.2139/ssrn.3783426

Rodney N Sullivan (Contact Author)

University of Virginia, Darden Graduate School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-0644 (Phone)

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