Hedge Funds Put into Perspective

Hedge Fund Summary: Hedge fund peer groups are hazardous to your wealth

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Q2 hedge fund letters, conference, scoops etc

"Then again to have market manipulation take place, we need to have an actual "market", which the Fed and every other central bank coordinated to destroy years ago." – Stalingrad & Poorski

Investors allocated to UCITS funds by region in 2017

Hedge Funds Put into Perspective

JP Morgan

Primary reason for investing in UCITS funds

Hedge Funds Put into Perspective

JP Morgan

Primary reason for not investing in UCITS funds

Hedge Funds Put into Perspective

JP Morgan

Hedge fund peer groups are hazardous to your wealth

In his seminal "10 Things Investors Should Know About Hedge Funds," Dr Harry Kat documents a big problem with hedge fund peer groups. Funds in these peer groups do not belong together, because their performance is not correlated. They behave differently.

Hedge Funds Put into Perspective

Consider, for example, "market-neutral." This very popular strategy comes in many forms - dollar, beta, style, sector - the list goes on, and many funds that call themselves market-neutral should not. Kat finds correlations to be a mere 0.23 among funds in market-neutral peer groups, substantiating the fact that these funds are different from one another. These funds do not belong together. Consequently, hedge fund managers win or lose based on beta rather than alpha.

Seeking Alpha

The effect of the accidental disclosure of confidential short sales positions

Rients Galema

Utrecht University - Utrecht University School of Economics

Dirk Gerritsen

Utrecht University - Utrecht University School of Economics

Abstract: EU regulations mandate that short sellers disclose short positions as of 0.2% to authorities, which publicly disclose positions as of 0.5%. In January 2017, the Netherlands Authority for the Financial Markets accidentally disclosed confidential positions. Using the entire register, we show that small positions forecast future underperformance. We use the accidental disclosure as natural experiment to analyze the effect of publishing this information. Abnormal returns are positive after the disclosure. A possible explanation is that perceived short- selling risk on disclosed positions increased, which reduced the appetite for shorting. This is consistent with a post-event drop in abnormal short sales costs.


Talking your book: Evidence from stock pitches at investment conferences

Patrick Luo Harvard University

Abstract: Using a novel dataset on investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences and strategically release their book information to drive market demand. Specifically, Hedge funds sell pitched stocks after the conferences to take profit and create room for better investment opportunities. However, pitched stocks still perform better than non- pitched stocks in the funds' portfolios afterwards. Hedge funds do not pitch obviously bad stocks because maintaining a good reputation helps them raise more money. Pitched stocks earn a cumulative abnormal return of 20% over 18 months before the pitch and continue to outperform the benchmark by 7% over 9 months afterwards. Half the post-conference abnormal return reverts after another 9 months.

Moreover, mutual funds exhibit opposite trading behaviors—selling before the pitches and buying afterwards—and possibly contribute to the post-pitch outperformance. Other hedge funds trade pitched stocks similarly to the funds that pitched, suggesting that they either run correlated strategies or share information with each other.


Ageing hedge fund founders: Average age of leading hedge fund founders

Hedge Funds Put into Perspective

AIMA Research

Read the full article here.


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