Quasi-hedge funds market in Poland in view of their performance persistence
-
DOIhttp://dx.doi.org/10.21511/imfi.18(3).2021.08
-
Article InfoVolume 18 2021, Issue #3, pp. 82-93
- Cited by
- 642 Views
-
218 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Performance persistence analysis is important as it has a decisive influence on investor allocation decisions. Investors can use quasi-hedge funds’ persistence to build effective investment strategies. Thus, the paper explores performance persistence of quasi-hedge funds operating at the Polish capital market. The methodology is based on constructing the new market performance index intended only for absolute return funds. It is validated regarding absolute returns of Polish quasi-hedge funds. The Absolute Return Index (ARI) is used to rate quasi-hedge funds’ performance persistence in assessing their fundamental purpose: to deliver consistently positive returns in all market conditions. For this, their quarterly return rates are used. All 53 funds operating for at least 36 months and representing 48.2% of the entire segment of absolute return funds are analyzed. The use of ARI allows examining quasi-hedge funds’ performance persistence in terms of market changes and the assessment of their purpose. In the short term (6 months) profitability remained persistent, while in the long term (12 months) such a hypothesis could be refuted. More than 40% of funds showed positive persistence within six months; only positive persistence occurred in the short term. 9.4% of funds repeatedly obtained negative returns, so absolute return funds’ negative performance persisted neither in the short nor long term. Closed-ended investment funds showed much stronger persistence of above-average positive returns, which additionally tended to avoid repeating negative returns in two-quarter and four-quarter series. This confirms the assumption that in this respect the Polish market is similar to the developed ones.
- Keywords
-
JEL Classification (Paper profile tab)D53, G11, G23
-
References34
-
Tables6
-
Figures0
-
- Table 1. Performance persistence of FIO and SFIO absolute return funds in 2005–2017
- Table 2. Performance persistence of FIZ absolute return funds in 2005–2017
- Table 3. Quarterly return and risk for FIO and SFIO in 2005–2017
- Table 4. Quarterly return and risk for FIZ in 2005–2017
- Table 5. Proportion of Polish quasi-hedge funds showing performance persistence in 2005–2017
- Table 6. Correlation coefficients of returns on assets for WIG, WIG20, WIG20USD, DAX, S&P500, hedge fund index BHFI and ARI in 1997–2017
-
- Agarwal, V., & Naik, N.Y. (2000a). Multi-period performance persistence analysis of hedge funds. Journal of Financial and Quantitative Analysis, 35(3), 327-342.
- Agarwal, V., & Naik, N. Y. (2000b). On taking the alternative route: risks, rewards and performance persistence of hedge funds. Journal of Alternative Investment, 2(4), 6-23.
- Agarwal, V., Fos, V., & Jiang, W. (2014). What Happens “Before the Birth” and “After the Death” of a Hedge Fund? Bankers, Markets & Investors, 129, 18-26.
- Amenc, N., Curtis, S., & Martellini, L. (2004). The alpha and omega of hedge fund performance measurement (Working Paper). Risk and Asset Management Research Center.
- Ammann, M., Huber, O., & Schmid, M. (2010). Hedge Fund Characteristics and Performance Persistence. European Financial Management, 19(2), 76-93.
- Boyson, N. M. (2008). Hedge fund performance persistence. A new approach. Financial Analysts Journal, 64(6), 27-44.
- Capocci, D., Corhay, A., & Hübner, G. (2005). Hedge fund performance and persistence in bull and bear markets. The European Journal of Finance, 11(5), 361-392.
- Carhart, M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), 57-82.
- Chen, K., & Passow, A. (2003). Quantitative selection of long-short hedge funds (FAME Research Paper Series rp94). International Center for Financial Asset Management and Engineering.
- Eling, M. (2009). Does hedge fund performance persist? Overview and new empirical evidence. European Financial Management, 15(2), 362-401.
- Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. The Journal of Finance, 47(2), 427-465.
- Grinblatt, M., & Titman, S. (1989). Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings. The Journal of Business, 62(3), 393–416.
- Gregoriou, G. N., & Rouah, F. (2001). Last year’s winning hedge fund as this year’s selection: a simple trading strategy. Derivatives Use, Trading & Regulation, 7(3), 269-274.
- Gruszczyński, L. A. (1986). Elementy statystyki dla socjologów. Katowice: Uniwersytet Śląski. (In Polish).
- Hamza, O., & Kooli, M. (2014). Do “Hot Hands” Exist in Funds of Hedge Funds? The Journal of Wealth Management, 16(4), 65-80.
- Harri, A., & Brorsen, B. W. (2004). Performance persistence and the source of returns for hedge funds. Applied Financial Economics, 14(2), 131-141.
- Henn, J., & Meier, I. (2004). Performance analysis of hedge funds. In H. Dichtl, J. M. Kleeberg, & C. Schlenger (Eds.), Handbuch Hedge Funds (pp. 435-466). Bad Soden: Uhlebruch Verlag.
- Jagannathan, R., Malakhov, A., & Novikov, D. (2010). Do hot hands persist among hedge fund managers? An empirical evaluation. The Journal of Finance, 65(1), 217-255.
- Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of Finance, 23(2), 389-416.
- Kat, H. M., & Manexe, F. (2003). Persistence in hedge fund performance: the true value of a track record. The Journal of Alternative Investments, 5(4), 66-72.
- Koh, F., Koh, W. T. H, & Teo, M. (2003). Asian hedge funds: return persistence, style and fund characteristics (Working Paper). Singapore Management University.
- Kosowski, R., Naik, N. Y., & Teo, M. (2007). Do hedge funds deliver alpha? A Bayesian and bootstrap analysis. Journal of Financial Economics, 84(1), 229-264.
- Kouwenberg, R. (2003). Do hedge funds add value to a passive portfolio? Journal of Asset Management, 3, 361-382.
- Malkiel, B. G., & Saha, A. (2005). Hedge funds: risk and return. Financial Analysts Journal, 61(6), 80-88.
- Manser, S., & Schmid, M. M. (2016). The Performance Persistence of Equity Long/Short Hedge Funds. In S. Satchell (Ed.), Derivatives and Hedge Funds. London: Palgrave Macmillan.
- Mentel, G., Brożyna, J., & Szetela, B. (2017). Evaluation of the effectiveness of investment fund deposits in Poland in a time of crisis. Journal of International Studies, 10(2), 46-60.
- Miziołek, T., & Trzebiński, A. (2017). Efektywność polskich funduszy inwestycyjnych – przegląd metod i literatury. Finanse, 1, 93-119. (In Polish).
- Perez, K. (2011). Wyniki inwestycyjne funduszy hedge. Czynniki wpływające na ich interpretację. Bank i Kredyt, 6(42), 85-124. (In Polish).
- Robiyanto, R., Hadiyatno, D., Sudjinan, S., & Ernayani, R. (2019). Gold and capital market in Indonesia: A preview on strategy of hedging and diversification. Journal of International Studies, 12(2), 117-128.
- Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), 119-138.
- Sharpe, W. F. (1994). The Sharpe ratio. Journal of Portfolio Management, 21(1), 49-58.
- Souza, de C., & Gokcan, S. (2004). Hedge fund investing: a quantitative approach to hedge fund manager selection and de-selection. Journal of Wealth Management, 6(4), 52-73.
- Stafylas, D., Anderson, K., & Uddin, M. (2016). Recent Advances in Hedge Funds’ Performance Attribution: Performance Persistence and Fundamental Factors. International Review of Financial Analysis, 43, 48-61.
- Sun, Z., Wang, A. W., & Zheng, L. (2018). Only Winners in Tough Times Repeat: Hedge Fund Performance Persistence over Different Market Conditions. Journal of Financial and Quantitative Analysis, 53(5), 2199-2225.