Puzzle solved? A comprehensive analysis of hedge fund-like mutual funds according to the value-added paradigm

Nathaniel Light () and Ivan Stetsyuk ()
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Nathaniel Light: St. John Fisher College
Ivan Stetsyuk: Université du Québec á Montréal

Journal of Asset Management, 2022, vol. 23, issue 3, No 6, 256-275

Abstract: Abstract Mutual funds that claim hedge fund strategies (HMFs) have experienced large increases in assets under management, yet academic studies are nearly unanimous in their negative appraisal of HMF performance. This paper examines whether this inconsistency can be resolved through the ‘value added’ paradigm. We demonstrate instead that pockets of value production and skill coexist alongside a largely wasteful HMF space as a whole. We document a highly fractured market structure in which the top 10 firms control 48% assets, the bottom half only 4%, and nearly 40% of firms disappear within a brief window. We explore the implications for tests of performance under such conditions.

Keywords: Hedged mutual funds; Manager skills; Value added; Bootstrap (search for similar items in EconPapers)
JEL-codes: G23 J24 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41260-022-00261-5

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