Friday, October 19, 2007

Best paper I saw on Thursday

While many papers I have seen here have been very good, possibly the best was by Agarwal, Boyson, and Naik on Hedged Mutual Funds. It is a really interesting and well done paper that is forthcoming in JFQAA.

I will discuss the paper soon (have to run to next session right now), but here is some background on hedged mutual funds.

From Investopedia:
"Hedged mutual funds, although previously only available to institutional clients, are now
readily available for use in the small retail investor's toolkit. While these types of mutual funds are gaining acceptance overseas, this article will focus on their relatively new existence in the United States retail investor marketplace. As a result of the repeal of the SEC's short-short rule in 1997, these funds draw on the decades-old hedge fund strategies within the traditional mutual fund structure. (To read more about traditional hedge funds, see Introduction To Hedge Funds - Part One, Part Two and A Brief History Of The Hedge Fund.)

With this relatively new mutual fund category, the barriers to entry are much lower."
And an old article on them from Financial Planning--Hedge-Like Mutual Funds Attract Investors: Mutual funds that strive for absolute returns in all kinds of markets rather than beating a particular benchmark are gaining in popularity, according to The Wall Street Journal.:
"...offer lower fees than pure hedge funds, as well as greater transparency and
liquidity, which further guarantee money-making opportunities. They offer a
higher level of oversight, charge lower fees, and face more scrutiny from
watchdogs than most hedge funds. Investors can also withdraw and add money on a
daily basis. "

1 comment:

Josh Patrick said...

This speaks to the need of the consumers to start moving from a relative return world to an absolute return world. Investors are not interested in beating a particular index, they are interested in how much money they get to spend.