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The Journal of Alternative Investments

The Journal of Alternative Investments

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A Tail of Two Cities: On the Downside Risk and Loss
Profile of Asian and North American Hedge Funds

Joseph Cherian, Christine Kon and William Weng
The Journal of Alternative Investments Summer 2016, 19 (1) 55-77; DOI: https://doi.org/10.3905/jai.2016.19.1.055
Joseph Cherian
is Practice Professor of finance and director of the Centre for Asset Management Research and Investments at the NUS Business School in Singapore.
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  • For correspondence: bizjc@nus.edu.sg
Christine Kon
is a research analyst with the Centre for Asset Management Research and Investments at the NUS Business School in Singapore.
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  • For correspondence: bizck@nus.edu.sg
William Weng
is founding partner and CIO of Shanghai Co-Win Shengyun Asset Management Co., Ltd. and an advisory council member of CAMRI at NUS Business School.
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  • For correspondence: yongweng@hotmail.com
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Abstract

This article analyzes the downside risk and loss profiles of hedge funds in North America and Asia to identify any significant differences between the geographic markets and to determine how these differences have converged or diverged over time. An attempt is made to understand the performance drivers that differentiate Asian from North American hedge funds. In the downside-risk analysis of 2,631 North American and 994 Asian hedge funds from January 1995 to February 2013, event-driven investment strategies for both geographic regions perform better than the other hedge fund investment strategies in relation to both risk and return and downside risk. More diversified funds, such as multistrategy hedge funds, do not necessarily perform better than single-manager strategies in relation to downside risk, while relative value strategies exhibit the most similar characteristics across the two geographies. Following their lackluster performance during the Asian financial crisis, Asian hedge funds improved their risk-adjusted performance, particularly during the recent global financial crisis when their loss profile reached a level similar to that of their North American peers. Lastly, nearby funds (i.e., funds whose managers are located in the same investment geography) have slightly worse loss profiles than distant funds in both geographic markets, a result that is slightly contrary to extant empirical evidence.

TOPICS: Real assets/alternative investments/private equity, global, risk management, performance measurement

  • © 2016 Pageant Media Ltd
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The Journal of Alternative Investments: 19 (1)
The Journal of Alternative Investments
Vol. 19, Issue 1
Summer 2016
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A Tail of Two Cities: On the Downside Risk and Loss
Profile of Asian and North American Hedge Funds
Joseph Cherian, Christine Kon, William Weng
The Journal of Alternative Investments Jun 2016, 19 (1) 55-77; DOI: 10.3905/jai.2016.19.1.055

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A Tail of Two Cities: On the Downside Risk and Loss
Profile of Asian and North American Hedge Funds
Joseph Cherian, Christine Kon, William Weng
The Journal of Alternative Investments Jun 2016, 19 (1) 55-77; DOI: 10.3905/jai.2016.19.1.055
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  • Article
    • Abstract
    • OUR RESEARCH FOCUS
    • DATA AND METHODOLOGY
    • OVERALL RISK AND RETURN CHARACTERISTICS OF NORTH AMERICAN AND ASIAN HEDGE FUNDS
    • DOWNSIDE RISK OF NORTH AMERICAN AND ASIAN HEDGE FUNDS
    • EFFECT OF HEDGE FUND CHARACTERISTICS ON LOSS DISTRIBUTION PROFILES
    • HEDGE FUND DEATH
    • EXCLUDED FUNDS
    • CONCLUSION
    • ACKNOWLEDGEMENTS
    • NOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

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