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A Law and Finance Analysis of Hedge Funds

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  • Douglas Cumming
  • Na Dai

Abstract

This paper empirically analyzes the impact of hedge fund regulation on fund structure and performance. The data indicate restrictions on the location of key service providers and permissible distributions via wrappers are associated with lower fund alphas, lower average monthly returns, and higher fixed fees. Furthermore, restrictions on the location of key service providers are associated with lower manipulation‐proof performance measures, while wrapper distributions are associated with lower performance fees. As well, the data show standard deviations of monthly returns are lower among jurisdictions with restrictions on the location of key service providers and higher minimum capitalization requirements.

Suggested Citation

  • Douglas Cumming & Na Dai, 2010. "A Law and Finance Analysis of Hedge Funds," Financial Management, Financial Management Association International, vol. 39(3), pages 997-1026, September.
    • Handle: RePEc:bla:finmgt:v:39:y:2010:i:3:p:997-1026
    DOI: 10.1111/j.1755-053X.2010.01102.x
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    1. repec:dau:papers:123456789/13099 is not listed on IDEAS
    2. Cumming, Douglas & Dai, Na & Haß, Lars Helge & Schweizer, Denis, 2012. "Regulatory induced performance persistence: Evidence from hedge funds," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1005-1022.
    3. repec:dau:papers:123456789/13772 is not listed on IDEAS
    4. Douglas Cumming & Na Dai, 2010. "Hedge Fund Regulation and Misreported Returns," European Financial Management, European Financial Management Association, vol. 16(5), pages 829-857, November.
    5. Cumming, Douglas & Dai, Na & Johan, Sofia, 2020. "Dodd-Franking the hedge Funds," Journal of Banking & Finance, Elsevier, vol. 119(C).
    6. Cumming, Douglas & Dai, Na & Johan, Sofia, 2015. "Are hedge funds registered in Delaware different?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 232-246.
    7. George Aragon & Bing Liang & Hyuna Park, 2014. "Onshore and Offshore Hedge Funds: Are They Twins?," Management Science, INFORMS, vol. 60(1), pages 74-91, January.

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