Non-Ucits hedge funds tend to have both lower volatility and tail risk, while broadly outperforming their Ucits counterparts, research from Edhec-Risk Institute suggests.
Volatility and tail risk is often lower among non-Ucits funds owing to hurdles to the transportation of risk management techniques in Ucits funds.
Ucits hedge funds, however, have more favourable liquidity terms, measured on a total risk-adjusted basis.
The research suggests that the domicile of a fund is an important indicator of likely performance. Funds domiciled in Europe typically delivering lower risk-adjusted returns, compared with those domiciled in other regions.
The Edhec-Risk Institute analysed an aggregate hedge fund dataset that consisted of more than 24,000 unique hedge funds. Its research is drawn from the Newedge research chair on Advanced Modelling for Alternative Investments at Edhec-Risk Institute.
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