This paper focuses on an unexplored dimension of fund managers' timing ability: market-wide tail risk implied by information in options markets. We investigate whether hedge fund managers can strategically time market tail risk implied by options through adjusting their portfolios' market exposure to changes in market tail risk. Using an extensive sample of 6,147 equity-oriented hedge funds over the period 1996 to 2012, we find strong evidence of tail risk timing ability of hedge fund managers. We conduct bootstrap analysis and confirm that our tail risk timing ability is not attributed to pure luck. Furthermore, tail risk timing ability brings significant economic value to investors. Specifically, in out-of-sample tests, top-ranked hedge funds outperform bottom-ranked funds by 5-7% annually after adjusting for common risk factors. Also, we find that managers' tail risk timing skill persists over time, suggesting that hedge fund managers' tail risk timing ability reflects true managerial skill. Our overall results are robust to various hedge fund characteristics, subsample or sub-period analysis, the use of alternative timing abilities, and other hedge funds' managerial skills. Our empirical examination emphasizes the role of market-wide option-implied tail risk in hedge fund managers' skill and their performance.

Whether already experienced with hedge funds or just thinking about investing in them, readers need a firm understanding of this unique investment vehicle in order to achieve maximum success. Hedge Funds unites over thirty of the top practitioners and academics in the hedge fund industry to provide readers with the latest findings in this field. Their analysis deals with a variety of topics, from new methods of performance evaluation to portfolio allocation and risk/return matters. Although some of the information is technical in nature, an understanding and applicability of the results as well as theoretical developments are stressed. Filled with in-depth insight and expert advice, Hedge Funds helps readers make the most of this flexible investment vehicle.

How will the funds of hedge funds (FoHF) business have to change to survive in the wake of the 2008-2012 financial crisis? This new research provides valuable insight. Reconsidering Funds of Hedge Funds presents the first comprehensive views of UCITS as well as recent trends in due diligence, risk management, and hedge fund deaths and survivors. The book contains original chapters by 22 academics and 16 hedge fund professionals, and includes two sections on performance: one that looks at UCITS FoHF and one that deals with traditional FoHF performance. Most chapters examine aspects of the 2008-2012 financial crisis, and almost every chapter addresses fund of hedge funds' management process before, during, and after the crisis. Covers recent advances in risk management, due diligence, tail risk, and allocation Presents an in-depth analysis of UCITs Balances academic and professional viewpoints

Hedge funds are favoured by pension funds, institutional investors, and high wealth investors for their flexible investment trading strategies and possible diversification benefits with existing portfolios. The following three research papers help us understand certain hedge fund characteristics by examining fund performance and by making comparisons to other types of investments. The first essay investigates the relationship between hedge fund performance fees and risk adjusted returns. The paper introduces an "effort" variable and reasons that the performance of hedge funds and the payoff of the performance fee contract are endogenously determined by the fund manager's effort. The paper concludes that the performance fee contract aligns the interest of the fund manager and the investor, and creates a win-win risk sharing instead of a risk shifting situation. Empirically, we find that performance fees are positively associated with risk adjusted returns. The second essay examines the hedge fund tail risk in terms of the Value at Risk (VaR) and Expected Shortfall and compares these measures with those of mutual funds. It also studies the hedge fund tail risk dependence on the stock market index and VIX index as well as the phase-locking effect. The third essay studies the cross-sectional difference between hedge fund style indexes and industry portfolios. It also examines the diversification benefit of investing in a pool of hedge funds.

Hedge Funds: Structure, Strategies, and Performance provides a synthesis of the theoretical and empirical literature on this intriguing, complex, and frequently misunderstood topic. The book dispels some common misconceptions of hedge funds, showing that they are not a monolithic asset class but pursue highly diverse strategies. Furthermore, not all hedge funds are unusually risky, excessively leveraged, invest only in illiquid asses, attempt to profit from short-term market movements, or only benefit hedge fund managers due to their high fees. Among the core issues addressed are how hedge funds are structured and how they work, hedge fund strategies, leading issues in this investment, and the latest trends and developments. The authors examine hedge funds from a range of perspectives, and from the theoretical to the practical. The book explores the background, organization, and economics of hedge funds, as well as their structure. A key part is the diverse investment strategies hedge funds follow, for example some are activists, others focusing on relative value, and all have views on managing risk. The book examines various ways to evaluate hedge fund performance, and enhances understanding of their regulatory environment. The extensive and engaging examination of these issues help the reader understands the important issues and trends facing hedge funds, as well as their future prospects.