BECAM Adrien

Hedge funds have experienced rapid growth in their assets under management. However, their poor performance during the 2008 financial crisis and in recent years has called into question the absolute nature of their returns. The first chapter demonstrates a positive link between the degree of self-correlation in hedge fund returns and their overperformance. Consistent with the assumption of bias in the estimators, the most auto-correlated funds also have the lowest measured risk factor exposures. Chapter two shows that the auto-correlation in hedge fund returns is only partially due to liquidity problems, and thus that smoothing of returns by fund managers is very prevalent.Finally, chapter three highlights that capital risk on financial intermediaries is a new risk factor that strongly explains the cross-section of hedge fund returns. Part of the alpha comes in fact from a risk premium for exposure to this factor.

Hedge funds have experienced rapid growth in their assets under management. However, their poor performance during the 2008 financial crisis and in recent years has called into question the absolute nature of their returns. The first chapter demonstrates a positive link between the degree of self-correlation in hedge fund returns and their overperformance. Consistent with the assumption of bias in the estimators, the most auto-correlated funds also have the lowest measured risk factor exposures. Chapter two shows that the auto-correlation in hedge fund returns is only partially due to liquidity problems, and thus that smoothing of returns by fund managers is very prevalent.Finally, chapter three highlights that capital risk on financial intermediaries is a new risk factor that strongly explains the cross-section of hedge fund returns. Part of the alpha comes in fact from a risk premium for exposure to this factor.