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Flagship Funds At Hedge Fund Families, Melvyn Teo
Flagship Funds At Hedge Fund Families, Melvyn Teo
Research Collection BNP Paribas Hedge Fund Centre
Motivated by the stellar performance of flagship funds such as the Renaissance Medallion fund, we ask whether hedge fund firms (e.g. Renaissance Technologies) have incentives to protect the performance of their flagship funds (e.g. Medallion). We find that the flagship fund tends to outperform other funds within the fund family. The fees and redemption terms of non-flagship funds at launch is correlated with the past performance of the flagship fund. Finally, flagship fund performance has a positive impact on net flows into the other funds within the same family.
Quantitative Hedge Fund Selection (Part 2), Melvyn Teo
Quantitative Hedge Fund Selection (Part 2), Melvyn Teo
Research Collection BNP Paribas Hedge Fund Centre
Do fund incentives, volatility exposure, and liquidity risk affect fund performance? We show that hedge funds with high performance fees and high water mark provisions tend to outperform those with low performance fees and no high water marks. Moreover, funds that short volatility and embrace liquidity risk deliver significantly higher returns relative to funds that long volatility and eschew liquidity risk. Investors with access to secure capital and managed account platforms may be positioned to take advantage of these performance differences.