The Geography of Hedge Funds
This article analyzes the relationship between the risk-adjusted performance of hedge funds and their proximity to investments using data on Asia-focused hedge funds. I find, relative to an augmented Fung and Hsieh (2004) factor model, that hedge funds with a physical presence (head or research offi...
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| Veröffentlicht in: | The Review of financial studies 2009-09, Vol.22 (9), p.3531-3561 |
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| creator | Teo, Melvyn |
| description | This article analyzes the relationship between the risk-adjusted performance of hedge funds and their proximity to investments using data on Asia-focused hedge funds. I find, relative to an augmented Fung and Hsieh (2004) factor model, that hedge funds with a physical presence (head or research office) in their investment region outperform other hedge funds by 3.72% per year. The local information advantage is pervasive across all major geographical regions, but is strongest for emerging market funds and funds holding illiquid securities. These results are robust to adjustments for fund fees, serial correlation, backfill bias, and incubation bias. I show also that distant funds, especially those based in the United States and the United Kingdom, are able to raise more capital, charge higher fees, and set longer redemption periods, despite their underperformance relative to nearby funds. It appears that distant funds trade investment performance for better access to capital. |
| doi_str_mv | 10.1093/rfs/hhp007 |
| format | Article |
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I find, relative to an augmented Fung and Hsieh (2004) factor model, that hedge funds with a physical presence (head or research office) in their investment region outperform other hedge funds by 3.72% per year. The local information advantage is pervasive across all major geographical regions, but is strongest for emerging market funds and funds holding illiquid securities. These results are robust to adjustments for fund fees, serial correlation, backfill bias, and incubation bias. I show also that distant funds, especially those based in the United States and the United Kingdom, are able to raise more capital, charge higher fees, and set longer redemption periods, despite their underperformance relative to nearby funds. 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Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org. 2009</rights><rights>The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. 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I find, relative to an augmented Fung and Hsieh (2004) factor model, that hedge funds with a physical presence (head or research office) in their investment region outperform other hedge funds by 3.72% per year. The local information advantage is pervasive across all major geographical regions, but is strongest for emerging market funds and funds holding illiquid securities. These results are robust to adjustments for fund fees, serial correlation, backfill bias, and incubation bias. I show also that distant funds, especially those based in the United States and the United Kingdom, are able to raise more capital, charge higher fees, and set longer redemption periods, despite their underperformance relative to nearby funds. It appears that distant funds trade investment performance for better access to capital.</description><subject>Asia</subject><subject>Bias</subject><subject>Capital formation</subject><subject>Emerging markets</subject><subject>Equity</subject><subject>Fees</subject><subject>Fees & charges</subject><subject>Financial investments</subject><subject>Financial portfolios</subject><subject>Fund management</subject><subject>Geographic regions</subject><subject>Geography</subject><subject>Hedge funds</subject><subject>Hedging</subject><subject>Investment advisors</subject><subject>Investment funds</subject><subject>Investment planning</subject><subject>Investment portfolios</subject><subject>Investment returns</subject><subject>Investment strategies</subject><subject>Investment trusts</subject><subject>Investors</subject><subject>Portfolio management</subject><subject>Portfolio performance</subject><subject>Principal components analysis</subject><subject>Put & call options</subject><subject>Return on investment</subject><subject>Risk management</subject><subject>Shareholder activism</subject><subject>Stock exchanges</subject><subject>Stockholders</subject><subject>Studies</subject><issn>0893-9454</issn><issn>1465-7368</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2009</creationdate><recordtype>article</recordtype><recordid>eNp90EtLw0AUhuFBFKyXjWuFIIggxJ7JmUtmKcW2QsFNXQ_JXJqWthNnmkX_vZGICxeuzubh8PESckPhmYLCcfRp3DQtgDwhI8oEzyWK8pSMoFSYK8bZOblIaQMAFBmMyO2ycdnMhVWs2uaYBZ_NnV25bNrtbboiZ77aJnf9cy_Jx_R1OZnni_fZ2-RlkRvG4JALVXqgFtByw2trilIpT6va1h7RFbyqi9KLUihvDQcEw4W3nKvacWtKNHhJHoe_bQyfnUsHvVsn47bbau9Cl7TkknGJUvTy_o_chC7u-3G6QAAhVYE9ehqQiSGl6Lxu43pXxaOmoL8z6T6THjL1-GHAoWv_d3eD26RDiL-SQcGkEAq_AOcpb64</recordid><startdate>20090901</startdate><enddate>20090901</enddate><creator>Teo, Melvyn</creator><general>Oxford University Press</general><general>Oxford Publishing Limited (England)</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20090901</creationdate><title>The Geography of Hedge Funds</title><author>Teo, Melvyn</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c440t-698f01d03d5c5bdc2899f1abdbf33e25ab28f6869fdc5030c56fd559be5dc83c3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2009</creationdate><topic>Asia</topic><topic>Bias</topic><topic>Capital formation</topic><topic>Emerging markets</topic><topic>Equity</topic><topic>Fees</topic><topic>Fees & charges</topic><topic>Financial investments</topic><topic>Financial portfolios</topic><topic>Fund management</topic><topic>Geographic regions</topic><topic>Geography</topic><topic>Hedge funds</topic><topic>Hedging</topic><topic>Investment advisors</topic><topic>Investment funds</topic><topic>Investment planning</topic><topic>Investment portfolios</topic><topic>Investment returns</topic><topic>Investment strategies</topic><topic>Investment trusts</topic><topic>Investors</topic><topic>Portfolio management</topic><topic>Portfolio performance</topic><topic>Principal components analysis</topic><topic>Put & call options</topic><topic>Return on investment</topic><topic>Risk management</topic><topic>Shareholder activism</topic><topic>Stock exchanges</topic><topic>Stockholders</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Teo, Melvyn</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>The Review of financial studies</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Teo, Melvyn</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>The Geography of Hedge Funds</atitle><jtitle>The Review of financial studies</jtitle><stitle>Rev Finan Stud</stitle><date>2009-09-01</date><risdate>2009</risdate><volume>22</volume><issue>9</issue><spage>3531</spage><epage>3561</epage><pages>3531-3561</pages><issn>0893-9454</issn><eissn>1465-7368</eissn><abstract>This article analyzes the relationship between the risk-adjusted performance of hedge funds and their proximity to investments using data on Asia-focused hedge funds. I find, relative to an augmented Fung and Hsieh (2004) factor model, that hedge funds with a physical presence (head or research office) in their investment region outperform other hedge funds by 3.72% per year. The local information advantage is pervasive across all major geographical regions, but is strongest for emerging market funds and funds holding illiquid securities. These results are robust to adjustments for fund fees, serial correlation, backfill bias, and incubation bias. I show also that distant funds, especially those based in the United States and the United Kingdom, are able to raise more capital, charge higher fees, and set longer redemption periods, despite their underperformance relative to nearby funds. It appears that distant funds trade investment performance for better access to capital.</abstract><cop>Oxford</cop><pub>Oxford University Press</pub><doi>10.1093/rfs/hhp007</doi><tpages>31</tpages><oa>free_for_read</oa></addata></record> |
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| identifier | ISSN: 0893-9454 |
| ispartof | The Review of financial studies, 2009-09, Vol.22 (9), p.3531-3561 |
| issn | 0893-9454 1465-7368 |
| language | eng |
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| source | EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current) |
| subjects | Asia Bias Capital formation Emerging markets Equity Fees Fees & charges Financial investments Financial portfolios Fund management Geographic regions Geography Hedge funds Hedging Investment advisors Investment funds Investment planning Investment portfolios Investment returns Investment strategies Investment trusts Investors Portfolio management Portfolio performance Principal components analysis Put & call options Return on investment Risk management Shareholder activism Stock exchanges Stockholders Studies |
| title | The Geography of Hedge Funds |
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