Empirische Analyse der Drawdowns von Dach-Hedgefonds

Funds of Hedge Funds (FHF) are perceived to be the premier choice of institutional investorsfor first-time allocations into the alternative investment asset class. While many papers coverthe bright side of FHF investing, we in this paper empirically investigate the maximum drawdownsof FHF. Therefore, we analyze time series and descriptive variables of 649 FHF drawnfrom the Lipper TASS Hedge Fund database for the time period January 1996 to August2007. Our empirical results suggest that (1) the number as well as the magnitude of drawdownsdecreases with increasing experience of the FHF, (2) the average recovery is higherwith older FHF, (3) there is no difference in the magnitude of a maximum drawdown betweensmall and large FHF, (4) the higher a maximum drawdown of an FHF the longer it takes torecover, and (5) most of the maximum drawdowns happen at times of turmoil in financialmarkets. Therefore our findings especially question the acclaimed ability of FHF to deliverabsolute returns and also show that the beta risks involved with FHF are high. The advantagesof FHF should thus rather be their low long-term correlations to traditional asset classes aswell as their low volatility.