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Publication Can investors benefit from the performance of alternative UCITS?

Type

Working Paper

Institution(s)

University of Hamburg

Year

2015

Author(s)

Michael Busack
Wolfgang Drobetz
Jan Tille

Research Area

Asset Management

Keywords

Alternative mutual funds, UCITS funds, hedge funds, performance measurement, performance persistence

Abstract

We study the performance persistence of a large sample of alternative UCITS funds that is largely free of survivorship bias. Using contingency tables, we find that performance persists for up to two years following ranking. However, persistence is much stronger in the short run, and ranked portfolio tests indicate that investors profit from the persistence for only up to one year. For example, when quartile portfolios are formed based on funds’ prior 52-week Sharpe ratios, the top quartile outperforms the bottom quartile over the following 52 weeks by 3.2% per annum, measured by a seven-factor alpha. Furthermore, we link several fund characteristics to performance persistence, and find that offshore experience greatly enhances persistence, both statistically and economically.

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