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Hedge funds for retail investors? An examination of hedged mutual funds

Journal

Journal of Financial and Quantitative Analysis

Subject

Finance

Authors / Editors

Agarwal V;Boyson N M;Naik N Y

Biographies

Publication Year

2009

Abstract

Recently, there has been rapid growth in the assets managed by “hedged mutual funds”—mutual funds mimicking hedge fund strategies. We examine the performance of these funds relative to hedge funds and traditional mutual funds. Despite using similar trading strategies, hedged mutual funds underperform hedge funds. We attribute this finding to hedge funds’ lighter regulation and better incentives. Conversely, hedged mutual funds outperform traditional mutual funds. Notably, this superior performance is driven by managers with experience implementing hedge fund strategies. Our findings have implications for investors seeking hedge-fund-like payoffs at a lower cost and within the comfort of a regulated environment.

Publication Research Centre

Institute of Finance and Accounting

Available on ECCH

No


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