Return Smoothing, Liquidity Costs, and Investor Flows: Evidence from a Separate Account Platform

• 成果类型: Article
• 署名作者: Cao, Charles; Farnsworth, Grant; Liang, Bing; Lo, Andrew W.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Texas Christian University; University of Massachusetts System; University of Massachusetts Amherst; Massachusetts Institute of Technology (MIT)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2401
• 发表日期: 2017
• 页码: 2233-2250
• 关键词: HEDGE FUNDS; separate accounts; return smoothing; share restrictions

摘要

We use a new hedge fund data set from a separate account platform to examine (1) how much of hedge fund return smoothing is due to main fund-specific factors, such as managerial reporting discretion and (2) the costs of removing hedge fund share restrictions. These accounts trade pari passu with matching hedge funds but feature third-party reporting and permissive share restrictions. We use these properties to estimate that 33% of reported smoothing is due to managerial reporting methods. The platform's fund-level liquidity is associated with a 1.7% performance reduction on an annual basis. Investor flows chase monthly past performance on the platform but not in the associated funds.