Paper: Hedge Funds, exposiciones, riesgos

On the High-Frequency Dynamics of Hedge Fund Risk Exposures

Abstract: 
We propose a new method to model hedge fund risk exposures using relatively high frequency conditioning variables. In a large sample of funds, we find substantial evidence that hedge fund risk exposures vary across and within months, and that capturing within-month variation is more important for hedge funds than for mutual funds. We consider different within-month functional forms, and uncover patterns such as day-of-the-month variation in risk exposures. We also find that changes in portfolio allocations, rather than changes in the risk exposures of the underlying assets, are the main drivers of hedge funds’ risk exposure variation.

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Gráfico du Jour: Hedge Fund Performance 2010

(Fuente: EconomPicData)

Paper: Impacto del Disclosure

The Impact of Mandatory Hedge Fund Portfolio Disclosure

Abstract:
In this paper, we examine the use of hedge funds’ 13(f) filings by market participants. While many argue disclosure could harm investment funds, we find hedge funds largely benefit from disclosure while providing little private information to the marketplace. We detect abnormal trading volume around disclosure dates and also find significant, positive abnormal returns immediately after disclosure, suggesting the presence of copy-cat traders. We also find some hedge fund companies have significant volume changes on their positions prior to their disclosures. A long-short portfolio of these companies’ expanded-contracted positions purchased prior to the disclosure date earns positive, significant abnormal returns through the disclosure period. Finally, we find no evidence disclosed holdings offer long-term investors access to profitable information.

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Meriwether, el tercer intento

Hace menos de un año,  John Meriwether probaba su suerte con un segundo intento post LTCM. En la pasada semana, se corrio la noticia que esta preparando su tercer regreso con un fondo . El blog Financial Trend Matters comenta sobre el tema.

PD: Un buen libro sobre LTCM.

 

Gráfico du Jour: Prop trading post crisis

(Fuente: International Securities Lending Association, via FT Alphaville)

Paper: Hedge Fund Leverage

Hedge Fund Leverage

Abstract:
We investigate the leverage of hedge funds using both time-series and cross-sectional analysis. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values forecast increases in hedge fund leverage. Decreases in fund return volatilities also increase leverage.

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Paper: Hedge Funds entre Alphas y costos

The ABCs of Hedge Funds: Alphas, Betas, & Costs

Abstract:
Despite the retrenchment of the hedge fund industry in 2008, hedge fund assets under management are currently over one and a half trillion dollars. We analyze the potential biases in reported hedge fund returns, in particular survivor-ship bias and back fill bias. We then decompose the returns into three components: the systematic market exposure (beta), the value added by hedge funds (alpha), and the hedge fund fees (costs). We analyze the performance of a universe of about 8,400 hedge funds from the TASS database from January 1995 through December 2009. Our results indicate that both survivor-ship and back fill biases are potentially serious problems. Adjusting for these biases brings the net return from 14.26% to 7.63% for the equally weighted sample. Over the entire period, this return is slightly lower than the S&P 500 return of 8.04%, but includes a statistically significant positive alpha. We estimate a pre-fee return of 11.42%, which we split into a fee (3.78%), an alpha (3.01%), and a beta return (4.62%). The positive alpha is quite remarkable, since the mutual fund industry in aggregate does not produce alpha net of fees. The year by year results also show that alphas from hedge funds were positive during every year of the last decade, even through the recent financial crisis of 2008 and 2009.

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Paper: Hedge Funds y Medios

Does Recognition Explain the Media-Coverage Discount? Contrary Evidence from Hedge Funds

Abstract:
Previous studies document a media-coverage discount in the cross-section of stock returns, which is attributed to Merton’s investor-recognition hypothesis. This paper offers a natural experiment for this explanation by focusing on the media coverage of funds, not their underlying positions. Funds are not directly traded by investors; therefore one would not expect an investor-recognition discount in their cross-section. Yet, we document that hedge funds with media coverage underperform no-coverage funds by 3.5% annually over 1999–2008. Although media coverage affects fund flow, underperformance is not channeled through investor fund flow. The effect is more pronounced in funds at the top and bottom of past performance as well as small funds. Since the paper finds that the media-coverage discount in the cross-section of funds is similar to that found in the cross-section of stocks, it follows that Merton’s hypothesis need not be the only explanation for the media-coverage discount.

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Paper sobre Managers

The Good, the Bad or the Expensive? Which Mutual Fund Managers Join Hedge Funds?

Abstract:
Does the mutual fund industry lose its best managers to hedge funds? We find that mutual funds are able to retain their best-performing managers in the face of competition from a growing hedge fund industry by allowing them to manage a hedge fund side-by-side. A mutual fund manager with poor past performance is more likely to leave the mutual fund industry. A small fraction of these poor performers find a job with smaller, relatively unestablished hedge fund companies, especially when the hedge fund industry is growing fast. Thus, surging hedge fund industry provides opportunities for poor performers to end their sagging career in the mutual fund industry by finding jobs with obscure hedge fund companies. In addition, the managers of mutual funds with greater expenses are more likely to enter the hedge fund industry. However, hedge funds do not acquire superior performance for their investors by hiring these expensive managers.

Link al paper (Bajarlo desde Chicago Booth)