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Full-Text Articles in Business
Crisis Regulations: The Unexpected Consequences Of Floating Nav For Money Market Funds, Kyle D. Allen, Drew B. Winters
Crisis Regulations: The Unexpected Consequences Of Floating Nav For Money Market Funds, Kyle D. Allen, Drew B. Winters
Finance Faculty Publications and Presentations
From the inception of money market funds (MMFs), all MMFs reported a fixed $1 NAV (Net Asset Value). In July 2014, the Securities and Exchange Commission (SEC) issued new regulations for MMFs that require Prime institutional MMFs to report floating NAVs. The SEC did not expect a significant impact on the MMF industry from requiring floating NAVs for Prime institutional funds. We find that over 70% of the assets under management in Prime MMFs left Prime funds with over half the Prime funds closing. We find that more than half of the Prime retail MMFs (which are not required to …
Capturing Hedge Fund Risk Factor Exposures: Hedge Fund Return Replication With Etfs, Jun Duanmu, Yongjia Li, Alexey Malakhov
Capturing Hedge Fund Risk Factor Exposures: Hedge Fund Return Replication With Etfs, Jun Duanmu, Yongjia Li, Alexey Malakhov
Finance Faculty Publications and Presentations
We develop a new factor selection methodology of spanning the space of hedge fund risk factors with all available exchange traded funds (ETFs). We demonstrate the efficacy of the methodology with out-of-sample individual hedge fund return replication by ETF clone portfolios. This is consistent with our interpretation of ETF returns as proxies to risk factors driving hedge fund returns. We further consider portfolios of “cloneable” and “noncloneable” hedge funds, defined as top and bottom in-sample R2 matches, and demonstrate that our ETF clone portfolios slightly outperform cloneable hedge funds out of sample.