Evaluating UCITS Compliant Hedge Fund Performance

Despite having registered significant investor appetite in recent years, empirical research on UCITS compliant hedge funds (“Newcits” or “Alternative UCITS”) is a rare commodity. The major contribution of this paper is therefore to evaluate the performance of publicly regulated Alternative UCITS vehicles in comparison to traditional hedge funds. For the first time, a representative set of data has been analyzed on a period from June 2004 to May 2011. The results shed light on what really matters for investors: regulation, managerial skills and risk. We show that the UCITS regulatory constraints come at a cost to performance and that the impact of regulation differs from one strategy to another. We also find that the performance of Alternative UCITS is positively affected by the skill set of the manager. In particular, hedge fund experience is relevant when managing Alternative UCITS funds.
JEL Codes: G11; G18; G23

Keywords: Hedge Funds; Mutual Funds; Regulation; Managerial Skills.