Hedge Funds Development and their Role in Economic Crises

Incentives in Hedge Funds

We investigate a game of delegated portfolio management such as hedge funds featuring risk-neutrality, hidden types, and hidden actions. We show that capital gain tax plays the decisive role in solving the incentive problem. We characterize the constrained optimal fee scheme and capital gain tax rate; the fee after taxation must be linear and affected by gains and losses in a low-powered and sy...

Under One Roof: A Study of Simultaneously Managed Hedge Funds and Funds of Hedge Funds

 Vikas Agarwal is from Georgia State University, J. Mack Robinson College of Business, 35 Broad Street, Suite 1221, Atlanta GA 30303, USA. Email: [email protected]: +1-404-413-7326. Fax: +1-404-4137312. Vikas Agarwal is also a Research Fellow at the Centre for Financial Research (CFR), University of Cologne. ^ Yan Lu is from University of Florida, Warrington College of Business, Box 117168,...

Liquidity Spillovers in Hedge Funds: Evidence from the Holdings of Funds of Hedge Funds

We examine whether funds of hedge funds (FoFs) engage in costly fire sales of their hedge fund investments during the 2004–2011 period. We find that FoFs experiencing large outflows tend to liquidate holdings in funds with relatively few redemption restrictions (“liquid funds”), even when these funds perform well. A tracking portfolio that buys liquid funds involved in fire sales over the prior...

Hedge Funds, Funds-of-Funds, and Commodity Trading Advisors

Hedge Funds: Risk and Return

ince the early 1990s, hedge funds have become an increasingly popular asset class. The amount invested globally in hedge funds rose from approximately $50 billion in 1990 to approximately $1 trillion by the end of 2004.1 And because these funds characteristically use substantial leverage, they play a far more important role in the global securities markets than the size of their net assets indi...