This paper examines the impact of flow restrictions on superior persistence of performance in hedge funds. We find that not only money outflow restrictions such as redemption notice period, lock period, and payout period, but also money inflow restrictions such as minimum investment amount, closed-end, and closed to individual investors are positively associated with winners’ persistence. Out of two resources with respect to persistence, outflow restrictions are observed to be a more important factor for persistence than inflow restrictions.
We also document that managerial incentives have influence on winners’ persistence. Thus, we explore which feature is a more salient determinant for continuous excellent performance persistence. Interestingly, while each of funds with higher restrictions and funds with higher incentives displays higher ratio of persistence, funds with lower incentives given higher restrictions exhibit higher ratio of persistence than funds with higher incentives. This suggests that persistence is subject to flow restrictions rather than to incentives. The empirical results in this paper are resonant with the theoretical prediction of performance persistence by Glode and Green (2011) that reveal a determinant to affect persistence not from managerial skills but from unique structure of hedge funds composed of limited and general partners.
Key words: Hedge fund, performance persistence, flow restriction, managerial incentive
JEL classification: G11, G23
학회소식
[2012년 제 4차] Performance Persistence and Flow Restrictions in He
작성자 : 관리자
조회수 : 1049
게시일 :
2012-12-12
