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Strategic behavior within families of hedge funds

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  • Kolokolova, Olga
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    Abstract

    The paper investigates the strategic behavior of hedge fund families. It focuses on decisions to start and liquidate family-member funds. Hedge fund families tend to liquidate funds that underperform compared to other member funds, and to replace them by new ones. By choosing a launch time after a short period of superior performance by their member funds, families extend the spillover to new funds. Hedge fund families seem to be more experienced in promoting their funds and attracting fund inflow than in generating superior performance. This results in higher dollar compensation earned by managers within multi-fund families than in stand-alone funds.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426610004395
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 7 (July)
    Pages: 1645-1662

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:7:p:1645-1662

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Hedge fund families Investment companies Fund liquidation Fund origination;

    References

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    1. Zhao, Xinge, 2004. "Why are some mutual funds closed to new investors?," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1867-1887, August.
    2. Agarwal, Vikas & Kale, Jayant R., 2007. "On the relative performance of multi-strategy and funds of hedge funds," CFR Working Papers 07-11, University of Cologne, Centre for Financial Research (CFR).
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    12. Carl Ackermann & Richard McEnally & David Ravenscraft, 1999. "The Performance of Hedge Funds: Risk, Return, and Incentives," Journal of Finance, American Finance Association, vol. 54(3), pages 833-874, 06.
    13. John M. Griffin & Jin Xu, 2009. "How Smart Are the Smart Guys? A Unique View from Hedge Fund Stock Holdings," Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2331-2370, July.
    14. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
    15. Vikram Nanda, 2004. "Family Values and the Star Phenomenon: Strategies of Mutual Fund Families," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 667-698.
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    Cited by:
    1. Jackwerth, Jens Carsten & Kolokolova, Olga & Hodder, James E., 2008. "Recovering Delisting Returns of Hedge Funds," MPRA Paper 11641, University Library of Munich, Germany, revised 31 Oct 2008.

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