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

Large sample properties of matching estimators for average treatment effects

Juha Joenväärä and Robert Kosowski

Review of Finance, 2021, vol. 25, issue 1, 189-233

Abstract: This article examines the effect of regulatory constraints on fund performance and risk by comparing conventional and UCITS hedge funds. Using a matching estimator approach, we estimate the indirect cost of UCITS regulation to be between 1.06% and 4.05% per annum in terms of risk-adjusted returns. These performance differences are likely to stem from UCITS constraints such as those governing eligible assets, diversification, and short selling, and cannot be explained by differences in redemption terms or level of leverage. We confirm that our performance results are not driven by management company characteristics, fund manager characteristics, or unobserved confounder bias.

Keywords: Hedge fund performance; Mutual fund performance; Managerial skill; Regulation; Constraints (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:25:y:2021:i:1:p:189-233.

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