Unsmoothing Returns of Illiquid Funds

• 成果类型: Article
• 署名作者: Couts, Spencer J.; Goncalves, Andrei S.; Rossi, Andrea
• 署名单位: University of Southern California; University System of Ohio; Ohio State University; University of Arizona
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae006
• 发表日期: 2024
• 页码: 2110
• 关键词: COMMERCIAL REAL-ESTATE; Hedge funds; RISK; performance; portfolio; liquidity; Managers; MODEL

摘要

Funds investing in illiquid assets report returns with spurious autocorrelation. Consequently, investors need to unsmooth these funds' returns when evaluating their risk exposures. We show that funds with similar investments share a common source of spurious autocorrelation not fully resolved by traditional unsmoothing methods and thereby leading to underestimation of systematic risk. Thus, we propose a generalized unsmoothing technique and apply it to hedge funds and private commercial real estate funds. Our method significantly improves the measurement of funds' risk exposures and risk-adjusted performance, especially for highly illiquid funds. Overall, the average illiquid fund alpha is lower than previously thought. (JEL G11, G12, G23)