Finance and Financial Management Commons^™

Active Factor Investing: Hedge Funds Versus The Rest Of Us, Jun Duanmu, Yongjia Li, Alexey Malakhov

Finance Faculty Publications and Presentations

We examine whether the success of hedge fund market timing strategies can be replicated. We develop a methodology for creating a portfolio of ETFs to capture risk factor exposures of market timing hedge funds identified using extant market timing measures. We find that the top market timing hedge funds outperform their ETF clone peers and the superior performance cannot be replicated. We show that the irreplicable market timing skills are more profound in certain hedge fund styles. Finally, we provide evidence that the success of market timing strategies is driven by non-cloneable hedge funds that possess managerial skills.

Hedge Funds And Their Prime Broker Analysts, Sung Gon Chung, Manoj Kulchania, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

Are sell-side analysts reluctant to go against the investment views of their hedge funds when these hedge funds are their prime brokerage clients? We show that prime broker analysts tend to upgrade stocks recently bought by their clients. For stocks with upgraded recommendations, post-announcement cumulative abnormal returns are significantly lower for those purchased by the prime brokerage clients. Our results are stronger with high-dollar-turnover clients who generate more trading commissions. We also find that a hedge fund with a large bet on a stock has a stronger incentive to pressure the fund’s prime brokers to issue a favorable recommendation on …

Three Essays On The Performance Evaluation Of Actively Managed Investment Funds, Qing Yan

Graduate Theses and Dissertations

This dissertation investigates the performance of hedge funds and actively managed U.S. equity mutual funds.

The first chapter examines the relation between hedge funds and the low beta anomaly. Different conditions in the mutual fund and hedge fund industries should lead to different approaches with respect to the low beta anomaly. I find that, unlike most mutual funds, the average hedge fund tends to benefit considerably from the anomaly. About 2.3% per year of apparent alpha for the average hedge fund can be attributed to the low beta anomaly rather than manager skill. Low skill managers are the most reliant …

Hedge Fund Franchises, William Fung, David Hsieh, Narayan Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. Motivated by the aforementioned spillover effects, first funds outperform follow-on funds, after adjusting for risk. Consistent with the agency view, greater incentive alignment moderates the performance differential between first and follow-on funds. Moreover, multiple-product firms underperform single-product firms but harvest greater fee revenues, thereby hurting investors while benefitting firm partners. Investors respond to this growth strategy by redeeming from first funds of firms …