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Sifting Through The Wreckage: Lessons From Recent Hedge-Fund Liquidations

In: The World Of Hedge Funds Characteristics and Analysis

Author

Listed:
  • Mila Getmansky

    (Isenberg School of Management, University of Massachusetts, Amherst, MA 01003, USA)

  • Andrew W. Lo

    (MIT Sloan School of Management, and AlphaSimplex Group, USA)

  • Shauna X. Mei

    (MIT Sloan School of Management, Cambridge, MA 02142, USA)

Abstract

We document the empirical properties of a sample of 1,765 funds in the TASS Hedge Fund database from 1977 to 2004 that are no longer active. The TASS sample shows that attrition rates differ significantly across investment styles, from a low of 5.2% per year on average for convertible arbitrage funds to a high of 14.4% per year on average for managed futures funds. We relate a number of factors to these attrition rates, including past performance, volatility, and investment style, and also document differences in illiquidity risk between active and liquidated funds. We conclude with a proposal for the US Securities and Exchange Commission to play a new role in promoting greater transparency and stability in the hedge-fund industry.

Suggested Citation

  • Mila Getmansky & Andrew W. Lo & Shauna X. Mei, 2005. "Sifting Through The Wreckage: Lessons From Recent Hedge-Fund Liquidations," World Scientific Book Chapters, in: H Gifford Fong (ed.), The World Of Hedge Funds Characteristics and Analysis, chapter 2, pages 7-47, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812569448_0002
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