Contrary to offshore hedge funds, US-registered (ldquo;onshorerdquo;) funds are subject to strict marketing prohibitions, accredited investor requirements, limited number of investors, and tax disadvantage. We exploit this difference to test predictions about organizational design, capital flow,...

This paper presents evidence on the relation between hedge fund returns and restrictions imposed by funds that limit the liquidity of fund investors. The excess returns of funds with lockup restrictions are approximately 4-7% per year higher than those of non-lockup funds. The average alpha of...