Journal of Investment Management, 4th Quarter, 2004
44 Pages Posted: 22 Nov 2004
We document the empirical properties of a sample of 1,765 funds in the TASS Hedge Fund database from 1994 to 2004 that are no longer active. The TASS sample shows that attrition rates differ significantly across investment styles, from a low of 5.2% per year on average for convertible arbitrage funds to a high of 14.4% per year on average for managed futures funds. We relate a number of factors to these attrition rates, including past performance, volatility, and investment style, and also document differences in illiquidity risk between active and liquidated funds. We conclude with a proposal for the U.S. Securities and Exchange Commission to play a new role in promoting greater transparency and stability in the hedge-fund industry.
Keywords: Hedge funds, risk management, liquidity
JEL Classification: G12, G20, G33
Suggested Citation: Suggested Citation
Lo, Andrew W. and Getmansky, Mila and Mei, Shauna X., Sifting through the Wreckage: Lessons from Recent Hedge-Fund Liquidations. Journal of Investment Management, 4th Quarter, 2004. Available at SSRN: https://ssrn.com/abstract=622521
By Bing Liang