Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds

Robert Kosowski and Joenväärä, Juha

No 10577, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We economically motivate and then test a range of hypotheses regarding performance and risk differences between UCITS-compliant and other hedge funds. The latter exhibit more suspicious return patterns than do absolute return UCITS (ARUs), but ARUs exhibit higher levels of operational risk. We find evidence of a strong liquidity premium: hedge funds offer investors less liquidity than do ARUs yet exhibit better risk-adjusted performance. Our findings are substantially unchanged under various robustness tests and adjustments for possible selection bias. The liquidity premium for ARUs and their lack of performance persistence have implications for both investors and policy makers.

Keywords: Hedge fund performance; Managerial skill; Mutual fund performance; Regulation (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-rmg
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Journal Article: The Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds* (2021)
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