We examine the funding liquidity risk of funds of hedge funds (FoFs) by proposing a new measure, illiquidity gap, which captures the mismatch between the liquidity of a FoF's portfolio and the liquidity offered to its own investors. We find that hedge funds that are exposed to the flow-driven...

Regulators often set value-at-risk (VaR) constraints to limit the portfolio risk of institutional investors. For some investors, notably pension funds, the VaR constraint is enforced over a horizon which is significantly shorter than the investment horizon of the investor. Our paper aims to...