Conference Agenda

This paper shows that the leveraged positioning of offshore hedge funds causes sovereign bond yields to temporarily overshoot in response to shocks. Combining granular regulatory transaction-level data on repo positions with high-frequency monetary policy surprises, I find that nearly one-third of the total yield movement on days with monetary policy surprises can be attributed to hedge fund trading, and that this effect scales with positioning intensity. Decomposing by position direction reveals that shocks induce deleveraging when prices move against the position and trend-following when prices move in its favor. These asymmetries have direct implications for bond market fragmentation, as they generate differential responses across countries.

Do private equity funds compensate investors for illiquidity through superior returns? Using a Monte Carlo simulation of 50 million synthetic funds, we estimate the full distribution of private equity returns under explicitly calibrated cash flow structures, circumventing the sample selection bias, NAV manipulation, and vintage dependence that limit existing empirical estimates. Under the standard 2/20 compensation structure, fewer than 46% of simulated funds outperform a passive public markets equivalent on a raw return basis, with mean underperformance of approximately 1%. However, PE funds exhibit substantially lower return volatility, yielding a coefficient of variation more than double that of a public markets benchmark. We interpret this as evidence that the illiquidity premium manifests as a volatility premium rather than a return premium. Analyzing the contractual determinants of returns, we find that hurdle rate and carried interest modifications produce modest LP gains but have large, asymmetric effects on GP incentives. The catch-up provision emerges as the dominant source of distributional distortion. We develop a theoretical model that identifies an interior optimal catch-up parameter of approximately 60% of current market practice, robust to LP risk preferences but sensitive to GP effort productivity. Our model-experiment design provides novel results in the debate about PE performance allowing full replicability and exact identification of the effects of different treatments on the estimated performance metrics.

Career transitions of U.S. mutual fund managers from 2004 to 2024 reveal two distinct paths: (i) simultaneously managing single funds (SFs) and fund-of-funds (FOFs), and (ii) fully switching to FOFs. Concurrent management reflects an opportunity-driven expansion strategy. However, managers who oversee both fund types experience a notable performance decline of 3.5–6.2 basis points per month. In contrast, complete switching represents a necessity-driven repositioning strategy. Interestingly, investor responses are asymmetric: despite similar performance, dual-role managers face persistent flow penalties, suggesting investor skepticism toward divided responsibilities, whereas managers who fully transition to FOFs encounter no such disadvantage.

Using confidential regulatory hedge fund data, we document strong negative sensitivity of fund performance to heightened interest rate volatility and a narrowing slope of the yield curve. This sensitivity varies significantly with hedge funds' use of interest rate derivatives and financial leverage, which play a critical role in their ability to generate returns across different interest rate scenarios. In addition, we find significant cross-sectional variation in performance sensitivity both across and within hedge fund strategies, consistent with divergent interest rate positioning within the sector that produces winners and losers from the same rate movements. This heterogeneity, combined with widespread leverage and derivative use, poses challenges for assessing systemic risks and interest rate transmission through the hedge fund sector.