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Does manager offshore experience count in the alternative UCITS universe?

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  • Benoît Dewaele
  • Iliya Markov
  • Hugues Pirotte
  • N. Tuchschmid

Abstract

This article examines the performance of alternative UCITS funds on the basis of manager offshore experience and, additionally, the existence of an “equivalent” offshore hedge fund. Managers with offshore experience are defined as management companies managing offshore hedge funds in addition to managing UCITS. For a sample period from 2008 to 2011, we find that such UCITS have a positive alpha, still with a p-value of 0.12 due to the limited size of the subsamples, which could provide some evidence of offshore manager added value. Among these UCITS, we identify further those which have an equivalent offshore hedge fund whose performance is replicated by using the same or a similar strategy, or through a swap. We find that “offshore-experienced” UCITS without offshore equivalents (1) exhibit no meaningful differences in mean performance compared to those with equivalents, but are (2) generally less volatile and show a positive significant alpha at the 95% level. Concentrating then on those with equivalent offshore hedge funds, the onshore-offshore comparison shows no significant differences in mean performance and volatility when we use equally-weighted indices but an offshore outperformance when we do a cross-sectional study. We also find a sizable regulation-induced tracking error.

Suggested Citation

  • Benoît Dewaele & Iliya Markov & Hugues Pirotte & N. Tuchschmid, 2011. "Does manager offshore experience count in the alternative UCITS universe?," Working Papers CEB 11-060, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/105771
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    References listed on IDEAS

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    1. Roberto Savona, 2006. "Tax-induced Dissimilarities Between Domestic and Foreign Mutual Funds in Italy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 35(2), pages 173-202, July.
    2. Almazan, Andres & Brown, Keith C. & Carlson, Murray & Chapman, David A., 2004. "Why constrain your mutual fund manager?," Journal of Financial Economics, Elsevier, vol. 73(2), pages 289-321, August.
    3. Jennifer Lynch Koski & Jeffrey Pontiff, 1999. "How Are Derivatives Used? Evidence from the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 54(2), pages 791-816, April.
    4. Fung, William & Hsieh, David A, 2001. "The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 313-341.
    5. Deli, Daniel N. & Varma, Raj, 2002. "Contracting in the investment management industry: *1: evidence from mutual funds," Journal of Financial Economics, Elsevier, vol. 63(1), pages 79-98, January.
    6. Agarwal, Vikas & Boyson, Nicole M. & Naik, Narayan Y., 2009. "Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(02), pages 273-305, April.
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    Cited by:

    1. Michael Busack & Wolfgang Drobetz & Jan Tille, 2017. "Can investors benefit from the performance of alternative UCITS funds?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(1), pages 69-111, February.

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