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Dr Ramadorai: secondary market research reveals deep links between hedge fund and closed-end mutual fund industries

Thursday, June 18, 2009 Share

Opalesque Industry Updates - A speech delivered at the GAIM International conference, the leading annual forum on hedge fund investment, has suggested that investor behaviour in the hedge fund market can be better analysed by drawing on insight from the closed-end mutual fund market.

The speech was delivered by Dr Tarun Ramadorai, Reader in Finance at the Saïd Business School of Oxford University, and a leading expert in international finance. Dr Ramadorai’s most recent research is investigating the performance of hedge funds.

Dr Ramadorai’s research has uncovered startlingly similar trends within the hedge fund market and the closed-ended mutual fund market over the last decade. Dr Ramadorai used data provided by secondary hedge fund market provider Hedgebay Trading Corporation, which matches sophisticated buyers and sellers of hedge fund interests and other illiquid alternative investment assets. His research analysed the factors that determine whether a trade on Hedgebay takes place at, or at a premium or discount to NAV.

This research has shown that there is a strong correlation between the average hedge fund premium and the premium on the average US closed-end mutual fund - these funds are traded on major US stock exchanges.

Moreover, Dr Ramadorai believes that theories put forward about the mutual fund market – such as a predicted nonlinear relationship between past performance a...

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