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How Risky are Low-Risk Hedge Funds?

Author

Listed:
  • Olga Kolokolova

    (University of Manchester, Alliance Manchester Business School, Manchester, UK)

  • Achim Mattes

    (University of Konstanz, Germany)

Abstract

This paper investigates the determinants of the average level of risk of hedge funds, which provide high liquidity to their investors and report their returns on a daily basis. We find that larger funds and funds charging higher incentive fees exhibit lower risk, whereas funds charging higher management fees, imposing longer notice periods, and stemming from large fund-families take more risk. There is considerable variation in the risk levels between funds reporting in Euro and USD, with Euro funds being consistently less risky, suggesting that these funds target different types of investors with other preferences.

Suggested Citation

  • Olga Kolokolova & Achim Mattes, 2016. "How Risky are Low-Risk Hedge Funds?," Bankers, Markets & Investors, ESKA Publishing, issue 140, pages 5-18, January-F.
    • Handle: RePEc:rbq:journl:i:140:p:5-18
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    More about this item

    Keywords

    Hedge Funds; Risk Taking; Incentives;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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