Arbeitspapier

Hedge fund investment in ETFs

This paper examines the causes and consequences of hedge fund investments in exchange traded funds (ETFs) using U.S. data from 1998 to 2018. The data indicate that transient hedge funds and quasi-indexer hedge funds are substantially more likely to invest in ETFs. Unexpected hedge fund inflows cause a rise in ETF investments, and the economic significance of unexpected flow is more than twice as large for transient than quasi-indexer hedge funds. ETF investment is in general associated with lower hedge fund performance. But when ETF investment is accompanied by an increase in total flow and unexpected flow, the negative impact of ETF holdings on performance is mitigated. The data are consistent with the view that hedge fund ETF investment unrelated to unexpected flow is an agency cost of delegated portfolio management.

Language
Englisch

Bibliographic citation
Series: CFS Working Paper Series ; No. 699

Classification
Wirtschaft
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Subject
Hedge funds
Exchange traded funds
ETFs
Agency costs
Active investors
Delegated portfolio management

Event
Geistige Schöpfung
(who)
Cumming, Douglas J.
Monteiro, Pedro
Event
Veröffentlichung
(who)
Goethe University Frankfurt, Center for Financial Studies (CFS)
(where)
Frankfurt a. M.
(when)
2023

Handle
URN
urn:nbn:de:hebis:30:3-689869
Last update
10.03.2025, 11:46 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Cumming, Douglas J.
  • Monteiro, Pedro
  • Goethe University Frankfurt, Center for Financial Studies (CFS)

Time of origin

  • 2023

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