Onshore and offshore hedge funds: Are they twins?

George Aragon, Bing Liang, Hyuna Park

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

Contrary to offshore hedge funds, U.S.-domiciled ("onshore") funds are subject to strict marketing prohibitions, accredited investor requirements, a limited number of investors, and taxable accounts. We exploit these differences to test predictions about organizational design, investment strategy, capital flows, and fund performance. We find that onshore funds are associated with greater share restrictions, more liquid assets, and a reduced sensitivity of capital flows to superior past performance. We also find some evidence that onshore funds outperform offshore funds, depending on the sample period. The results suggest that a fund's investment and financial policies reflect differences in investor clienteles and the regulatory environment.

Original languageEnglish (US)
Pages (from-to)74-91
Number of pages18
JournalManagement Science
Volume60
Issue number1
DOIs
StatePublished - Jan 1 2014

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Keywords

  • Liquidity risk
  • Lockup provision
  • Master-feeder structure
  • Offshore hedge funds

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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