Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/113655
Authors: 
Agarwal, Vikas
Green, T. Clifton
Ren, Honglin
Year of Publication: 
2015
Series/Report no.: 
CFR Working Paper 15-08
Abstract: 
Hedge fund flows chase alpha, yet they also follow returns attributable to traditional and exotic risk exposures. Investors appear more cognizant of exotic risks over time, with flows increasing their relative emphasis on returns from exotic betas in recent years. Investors also discriminate between which risks warrant high fees, with flows into high-fee funds being more likely to emphasize returns arising from exotic risks. Although we find strong evidence of persistence for alpha, persistence in hedge fund returns attributable to traditional and exotic risk exposures is modest, which suggests investors would benefit from employing more sophisticated risk models when evaluating fund performance.
Subjects: 
Hedge Funds
Investor Flows
Alpha
Alternative Beta
Exotic Beta
JEL: 
G11
G20
Document Type: 
Working Paper

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