SIFTING THROUGH THE WRECKAGE: LESSONS FROM RECENT HEDGE-FUND LIQUIDATIONS

Mila Getmansky, Andrew Lo () and Shauna X. Mei
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Mila Getmansky: Isenberg School of Management, University of Massachusetts, Amherst, MA 01003, USA
Shauna X. Mei: MIT Sloan School of Management, Cambridge, MA 02142, USA

Chapter 2 in The World of Hedge Funds:Characteristics and Analysis, 2005, pp 7-47 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe document the empirical properties of a sample of 1,765 funds in the TASS Hedge Fund database from 1977 to 2004 that are no longer active. The TASS sample shows that attrition rates differ significantly across investment styles, from a low of 5.2% per year on average for convertible arbitrage funds to a high of 14.4% per year on average for managed futures funds. We relate a number of factors to these attrition rates, including past performance, volatility, and investment style, and also document differences in illiquidity risk between active and liquidated funds. We conclude with a proposal for the US Securities and Exchange Commission to play a new role in promoting greater transparency and stability in the hedge-fund industry.

Keywords: Hedge Funds; Investment Analysis; Quantitative Analysis; Risk Analysis; Portfolio Analysis; Portfolio Returns; Risk of Hedge Funds (search for similar items in EconPapers)
Date: 2005
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