Role of Managerial Incentives, Flexibility, and Ability: Evidence from Performance and Money Flows in Hedge Funds

2005 ◽  
Author(s):  
Vikas Agarwal ◽  
Naveen D. Daniel ◽  
Narayan Y. Naik
Keyword(s):  
Hedge Funds ◽  
Managerial Incentives ◽  
Money Flows

The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-On Activities

2018 ◽  
Vol 54 (1) ◽  
pp. 101-153 ◽  
Author(s):  
Jim Hsieh ◽  
Tao-Hsien Dolly King
Keyword(s):  
Hedge Funds ◽  
Security Market ◽  
Target Firm ◽  
Market Effects ◽  
Bond Returns ◽  
Target Firms ◽  
Performance Consequences ◽  
Private Placements ◽  
And Performance

Recent research on blockholders focuses on activist hedge funds and documents positive stock but negative bond returns. This study investigates the role of blockholder heterogeneity on security market effects and target firm follow-on activities across three important dimensions: identity, motive, and purchasing method. We show that target firms’ security returns and post-acquisition activities strongly correlate with blockholder heterogeneity. Further, bond returns are significantly positive for firms with blockholders’ debt-assistance motive while both stock and bond returns are significantly negative in private placements. Overall, our findings highlight the importance of blockholder heterogeneity on the valuation and performance consequences in block acquisitions.

Porsche, Volkswagen, and CSX: Cars, Trains, and Derivatives

2017 ◽  
pp. 1-10
Author(s):  
David P. Stowell ◽  
Theron McLarty
Keyword(s):  
Financial Crisis ◽  
Hedge Funds ◽  
Family Members ◽  
Share Price ◽  
Investment Banks ◽  
Holding Company ◽  
Wrong Side ◽  
The Family ◽  
Recent Financial Crisis

Family members knew something was very wrong when Adolf Merckle, who had guided the family holding company, VEM Vermogensverwaltung GmbH, through dozens of successful investments, left the house one afternoon in January 2009 and failed to return. That night their fears were confirmed when a German railway worker located Merckle's body near a commuter train line near his hometown of Blaubeuren, about a hundred miles west of Munich. It was no secret that the recent financial crisis had taken a toll on Merckle's investments. He was known in Germany as a savvy investor, but had lost hundreds of millions of Euros after being caught on the wrong side of a short squeeze of epic proportions involving Volkswagen stock. This was not the only large bet against that company's stock. A number of hedge funds, including Greenlight Capital, SAC Capital, Glenview Capital, Tiger Asia, and Perry Capital, lost billions of Euros in a few hours based on their large short positions in Volkswagen's stock following the news on October 26, 2008, that Porsche AG had obtained a large long synthetic position in Volkswagen stock through cash-settled options. In the next two days, this short squeeze produced a fivefold increase in Volkswagen's share price, as demand for shares from hedge funds exceeded the supply of borrowable shares.This case focuses on the massive equity derivative positions entered into by Porsche in relation to Volkswagen stock and by TCI and 3G in relation to CSX stock. Students will learn how equity exposure can be created without buying stock and without prior disclosure. The role of regulators, courts, and investment banks that facilitate these transactions is also explored.

Can Liquidity Risk Explain Diseconomies of Scale in Hedge Funds?

2017 ◽  
Vol 07 (02) ◽  
pp. 1750002
Author(s):  
Hany A. Shawky ◽  
Ying Wang
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Fund Performance ◽  
Diseconomies Of Scale ◽  
Liquidity Crises ◽  
Using Data ◽  
Asset Size ◽  
Hedge Fund Performance

Using data from the Lipper TASS hedge fund database over the period 1994–2012, we examine the role of liquidity risk in explaining the relation between asset size and hedge fund performance. While a significant negative size-performance relation exists for all hedge funds, once we stratify our sample by liquidity risk, we find that such a relationship only exists among funds with the highest liquidity risk. Liquidity risk is found to be another important source of diseconomies of scale in the hedge fund industry. Evidently, for high liquidity risk funds, large funds are less able to recover from the relatively more significant losses incurred during market-wide liquidity crises, resulting in lower performance for large funds relative to small funds.

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