Using voluntary decisions to limit investment, we investigate if the high payndash;performance sensitivities of hedge fund managers cause them to avoid overinvestment. Our results show that the primary objective of hedge fund managers is to hoard assets. We find that for funds closed to new...

We evaluate the economic consequences of mutual fund advisory misconduct from 2000 to 2015. An average of 31.25% reduction in monthly fund flows occurs in one year after the misconduct. The effect is more pronounced in funds facing strong investor monitoring. Although all types of misconduct...

Utilizing a novel style identification procedure, we show that style-shifting is a dynamic strategy commonly employed by hedge fund managers. Three quarters of hedge funds shifted their investment styles at least once over the period from January 1994 to December 2013. We perform empirical tests...

In this paper we study hedge fund styles by examining both self-reported classification and a return-based classification on a sample of hedge funds over the period of 2005 to 2011. Using seven versions of the Lipper/TASS data, we are able to track self-reported classification on an annual...

Using a new dataset of hedge fund returns from separate accounts on the Lyxor platform, we examine the costs and advantages of the greater liquidity of the Lyxor platform verses those of the associated main hedge funds. Lyxor accounts are traded pari passu with the main fund but provide superior...

We explore a new dimension of fund managers' timing ability by examining whether they can time market liquidity through adjusting their portfolios' market exposure as aggregate liquidity conditions change. Using a large sample of hedge funds, we find strong evidence of liquidity timing. A...

Using comprehensive quarterly data on hedge fund stock holdings, we study the role of hedge funds in the process of stock price formation. We find that hedge funds tend to hold undervalued stocks, and that both hedge fund ownership and their trades are positively related to the degree of stock...

Due to imperfect transparency and costly auditing, trust is an essential component of financial intermediation. In this paper we study a sample of 444 due diligence (DD) reports from a major hedge fund DD firm. A routine feature of due diligence is an assessment of integrity. We find that...

Funds of funds are an increasingly popular avenue for hedge fund investment. Despite the increasing interest in hedge funds as an alternative asset class, the high degree of fund specific risk and the lack of transparency may give fiduciaries pause. In addition, many of the most attractive hedge...

Due diligence is an important source of alpha in a well designed hedge fund portfolio strategy. It is generally understood that the high returns possible in investing in hedge funds are somewhat offset by the relative lack of transparency on operational issues. The performance of a diversified...