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How Risky are Low-Risk Hedge Funds?

Olga Kolokolova and Achim Mattes
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Olga Kolokolova: University of Manchester, Alliance Manchester Business School, Manchester, UK
Achim Mattes: University of Konstanz, Germany

Bankers, Markets & Investors, 2016, issue 140, 5-18

Abstract: This paper investigates the determinants of the average level of risk of hedge funds, which provide high liquidity to their investors and report their returns on a daily basis. We find that larger funds and funds charging higher incentive fees exhibit lower risk, whereas funds charging higher management fees, imposing longer notice periods, and stemming from large fund-families take more risk. There is considerable variation in the risk levels between funds reporting in Euro and USD, with Euro funds being consistently less risky, suggesting that these funds target different types of investors with other preferences.

Keywords: Hedge Funds; Risk Taking; Incentives (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2016
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