The hedge fund industry has grown from $200 billion in assets under management around the turn of the millennium to now over $3 trillion. Many reports have criticized hedge funds for poor performance, particularly since the 2008 global financial crisis (GFC). In this paper, I seek to demystify...

Major index fund operators have been criticized as ineffective stewards of the firms in which they are now the largest shareholders. While scholars debate whether this passivity is a serious problem, index funds' generally docile approach to ownership is broadly acknowledged. However, this...

We show that mutual funds worldwide provide substantial international exposure through their domestic holdings of multinationals. An average domestic fund's international exposure increases by 32 percentage points when we consider international corporate diversification. We find that funds with...

Using a sample of U.S. international equity mutual funds, we show that funds that hire sub-advisors abroad do not outperform. For example, funds that hire outsourced international sub-advisors underperform on a risk-adjusted basis by up to 126 bps annually, relative to funds that do not...

We investigate the new reality of exchange-traded funds (ETFs). We show that many ETFs are active investments in form (designed to generate alpha) or function (serve as building blocks of active portfolios). The median ETF has an Activeness Index of 93.1%. Active-in-form ETFs have positive...

Unconventional monetary policy (UMP) by the US Federal Reserve, Bank of England, Bank of Japan, and European Central Bank affects the geographical portfolio choice of international mutual fund managers. UMP prompts managers of mutual funds to rebalance their portfolios away from the country...

This paper studies the level, determinants, and implications of the factor timing ability of hedge fund managers. We find that approximately 30% of hedge funds display factor timing ability on at least one factor, concentrated especially at the market, size, and bond factors. Better factor...

This paper explores the idea that investors ex ante price the risk that large fire sales by liquidity-shocked blockholders will trigger negative price impacts, referred to as "fragility risk," and argues that fragility risk should be lower for institutional blockholders who can credibly signal...

We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts...

We exploit the merger between BlackRock and Barclays Global Investors to study how changes in expected ownership concentration affect the investment behavior of funds and the cross-section of stocks worldwide. We find that funds with open-end structures and a large exposure to commonly-held...