Hedge Funds: The Living and the Dead

Liang, Bing

doi:10.2139/ssrn.213012

Cited by 158 publications

(169 citation statements)

References 18 publications

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“…32 This problem seems to plague hedge fund studies that use the available databases. Liang (2000) argues that the TASS database is generally superior to the HFR (Hedge Fund Research) database. He shows that there is not a very large overlap in the coverage between different hedge fund databases.…”

Section: Performance Of Hedge Funds That Invest In Pipesmentioning

confidence: 99%

Hedge Funds as Investors of Last Resort?

Brophy¹,

Ouimet²,

Sialm³

2006

Rev. Financ. Stud.

190

163

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Hedge funds have become important investors in public companies raising equity privately. Hedge funds tend to finance companies that have poor fundamentals and pronounced information asymmetries. To compensate for these shortcomings, hedge funds protect themselves by requiring substantial discounts, negotiating repricing rights, and entering into short positions of the underlying stocks. We find that companies that obtain financing from hedge funds significantly underperform companies that obtain financing from other investors during the following two years. We argue that hedge funds are investors of last resort and provide funding for companies that are otherwise constrained from raising equity capital. (JEL G14, G23, G32)Hedge funds have recently become an important source of funding for public companies raising equity privately. Financing young companies with severe information asymmetries is an important investment strategy for some hedge funds. Since 1995, hedge funds have participated in more than 50% of the private placements of equity securities and have contributed about one-quarter of the capital raised in such equity issuances, a total investment that has exceeded the contributions of other investor classes. This paper sheds light on the role of hedge funds in such private placements.In perfect financial markets it should be irrelevant whether a firm obtains funding from hedge funds or from other investors. To investigate whether the identity of the investors matters, we use a unique dataset that

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Section: Performance Of Hedge Funds That Invest In Pipesmentioning

confidence: 99%

Hedge Funds as Investors of Last Resort?

Brophy¹,

Ouimet²,

Sialm³

2006

Rev. Financ. Stud.

190

163

View full text Add to dashboard Cite

show abstract

“…It is well known indeed that some FOF in the dead group have simply stopped reporting, and are in fact alive and well. 4 In this study, however, we treat all FOFs in the dead group as having ceased operations, and do not differentiate between FOF that are actually dead, and those that have simply ceased reporting and exited the live group voluntarily.…”

Section: Methodsmentioning

confidence: 99%

“…Amin and Kat 2 further find that size and leverage effect HFs survival and that more than 40 per cent of HFs do not make it past their fifth year, consistent with Liang. 4 Rouah, 6 Gregoriou 9 and Brown et al, 7 all find that HFs with high returns experience high survival times. Brooks and Kat 15 find that approximately 30 per cent of new HFs with poor performance do not live past 36 months.…”

Section: Introductionmentioning

confidence: 98%

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Survival of strategic, market defensive, diversified and conservative fund of hedge funds: 1994–2005

Gregoriou¹,

Kooli

Rouah³

2008

J Deriv Hedge Funds

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Fabrice Douglas Rouah is Vice President (Senior Quantitative Analyst) for a large financial firm based in Boston, MA. Practical applicationsThis paper helps institutional investors, pension funds and endowments to identify factors driving funds of hedge funds survival. This is important since funds of hedge funds are often perceived as being less risky than individual hedge funds. The study also sheds light on the behaviour of four different funds of hedge funds sub-strategies. AbstractIn this paper, we investigate the survival lifetimes of fund of hedge funds (FOF) during the January 1994-December 2005 period. We focus on four FOF subcategories tracked in the Hedge Fund Research, Inc. database, and find important differences between the sub-categories in the attrition rates of FOFs. More specifically, using Weibull and Cox proportional hazards models, we find that FOF survival times depend on a number of predictor variables, including a FOF's efficiency score from a data envelopment analysis (DEA) model. We also confirm the fact that FOFs are not a homogeneous group of funds, but rather constitute four distinct management styles.

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“…They have also attracted considerable interest from academics (see, for example, Ackermann et al, 1 Brown et al, 2 Chen and Liang, 3 Fung and Hsieh, 4-7 Liang 8 and Getmansky et al, 9 among others). The tremendous popularity of this new investment vehicle can be explained by the highly diverse investment strategies employed by hedge fund managers and their alleged heterogeneous return profiles.…”

Section: Introductionmentioning

confidence: 99%

Time-varying asset allocation across hedge fund indices

Switzer

Omelchak²

2009

J Deriv Hedge Funds

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This paper looks at the risk-adjusted performance of dynamic asset allocation strategies across hedge fund indices using conditional volatility forecasting methods for constructing optimal portfolios for funds of funds. Monthly out-of-sample comparisons for nine Credit Suisse First Boston/Tremont hedge fund indices, as well as weekly and daily rebalanced dynamic portfolios are examined for the three main subindices of Standard & Poor's (S&P) Hedge Fund Index. A multivariate asymmetric Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model is also considered for portfolio construction using daily S&P Hedge Fund sub-indices data. Most hedge fund indices exhibit time-varying volatility and volatility clustering. Accounting for forecasted next-period volatility generates portfolios with the best riskreturn profile among all portfolios under consideration. After accounting for transaction costs, out-of-sample results indicate that all dynamic hedge fund index portfolios largely outperform the S&P 500 Index, both on an expected return and risk-adjusted return basis.

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Hedge Funds: The Living and the Dead

Cited by 158 publications

References 18 publications

Hedge Funds as Investors of Last Resort?

Hedge Funds as Investors of Last Resort?

Survival of strategic, market defensive, diversified and conservative fund of hedge funds: 1994–2005

Time-varying asset allocation across hedge fund indices

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