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

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.