47 Pages Posted: 19 Mar 2006 Last revised: 4 Dec 2012
Date Written: May 1, 2008
Recently, there has been rapid growth in the assets managed by “hedged mutual funds”— mutual funds mimicking hedge fund strategies.We examine the performance of these funds relative to hedge funds and traditional mutual funds. Despite using similar trading strategies, hedged mutual funds underperform hedge funds. We attribute this finding to hedge funds’ lighter regulation and better incentives. Conversely, hedged mutual funds outperform traditional mutual funds. Notably, this superior performance is driven by managers with experience implementing hedge fund strategies. Our findings have implications for investors seeking hedge-fund-like payoffs at a lower cost and within the comfort of a regulated environment.
Keywords: Hedge funds, mutual funds, hedged mutual funds, hybrid mutual funds
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
Boyson, Nicole M. and Agarwal, Vikas and Naik, Narayan Y., Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds (May 1, 2008). Journal of Financial and Quantitative Analysis (JFQA), Vol. 44, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=891621
By Bing Liang