Returns to Active Management

Hedge funds have made enormous fortunes for their managers, if not always for their investors. Perhaps due to their relative lack of transparency, these funds benefit from a sort of exceptional bias, where the outsize returns of a few get a lot of attention, while the general mediocrity of the rest receives less notice. Economists Maziar Kazemi and Ergys Islamaj – with the use of some fancy mathematics to help pull back the veil – explain how trading activity and risk affect hedge fund managers’ returns. getAbstract recommends their insights to analysts, investors and fund managers who might need to reconsider their strategies.