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Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds

47 Pages Posted: 19 Mar 2006 Last revised: 4 Dec 2012

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Vikas Agarwal

Georgia State University; University of Cologne - Centre for Financial Research (CFR)

Narayan Y. Naik

London Business School - Institute of Finance and Accounting

Date Written: May 1, 2008

Abstract

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

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

Nicole M. Boyson (Contact Author)

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4775 (Phone)

Vikas Agarwal

Georgia State University ( email )

35 Broad Street,
Suite 1221
Atlanta, GA 30303-3083
United States
404-413-7326 (Phone)
404-413-7312 (Fax)

HOME PAGE: http://www.gsu.edu/~fncvaa

University of Cologne - Centre for Financial Research (CFR)

Albertus-Magnus Platz
Cologne, 50923
Germany

Narayan Y. Naik

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 (Phone)
+44 20 724 3317 (Fax)

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