Onshore and Offshore Hedge Funds: Are They Twins?

George Aragon (), Bing Liang () and Hyuna Park ()
Additional contact information
George Aragon: W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85287
Bing Liang: Isenberg School of Management, University of Massachusetts, Amherst, Massachusetts 01003
Hyuna Park: College of Business, Minnesota State University, Mankato, Mankato, Minnesota 56001

Management Science, 2014, vol. 60, issue 1, 74-91

Abstract: Contrary to offshore hedge funds, U.S.-domiciled (“onshore”) funds are subject to strict marketing prohibitions, accredited investor requirements, a limited number of investors, and taxable accounts. We exploit these differences to test predictions about organizational design, investment strategy, capital flows, and fund performance. We find that onshore funds are associated with greater share restrictions, more liquid assets, and a reduced sensitivity of capital flows to superior past performance. We also find some evidence that onshore funds outperform offshore funds, depending on the sample period. The results suggest that a fund's investment and financial policies reflect differences in investor clienteles and the regulatory environment. This paper was accepted by Wei Xiong, finance.

Keywords: offshore hedge funds; lockup provision; liquidity risk; master-feeder structure (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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