Hedge Fund Size and Return Analysis Before and After 2008 Financial Crisis

Peer reviewed: 
No, item is not peer reviewed.
Scholarly level: 
Graduate student (Masters)
Date created: 
Hedge fund
Asset under management
Return performance
Investment strategy
Financial crisis
S&P 500
Market neutral
Market directional

In this paper, we attempt to examine the relationship between hedge fund asset under management (AUM) and fund return. We refer to the methodology and conclusions used in Platt, Cai, and Platt (2015). Focusing on funds reporting in US dollar, we analyze a sample of 2355 hedge funds from Lipper Hedge Fund database. We conduct equal-weighted method and AUM-weighted method to form the return indices.

We find that the AUM of hedge fund has a negative impact on the fund return performance before the 2008 financial crisis. This finding is consistent with researchers such as Brorsen and Harri (2004) and Platt, Cai, and Platt (2015). However, after the crisis, this effect becomes ambiguous. Moreover, we find that either market neutral or directional approach does not influence the fund return. S&P 500 also has significant power to explain the fund return.

Compared with the conclusions in Platt, Cai, and Platt (2015), we reach the same conclusion about the negative relationship between return and size of AUM and the indifferent influence power of market neutral and directional fund approach.


MSc in Finance Project-Simon Fraser University

Document type: 
Graduating extended essay / Research project
Copyright remains with the author.
Senior supervisor: 
Peter Klein
Beedie School of Business-Segal Graduate School