Examining How Style Affects the Performance of Hedge Funds

In this paper, we studied the monthly returns of hedge funds over the period 1998 to 2003 and found that there are styles of management that affect the performance. We found that differences in investment style contribute about 30 per cent of the variability in hedge funds performance. This result is consistent across the years of our sample. We have concluded that appropriate style management is crucial and affect negatively and positively the returns of hedge funds.The categories of hedge funds that are examined are emerging markets, distressed securities, event driven, fixed income arbitrage, global macro, long/short equity and funds of funds. The sample is provided from Data Feeder data set. It is very comprehensive and includes hedge funds categories from the period 1998 to 2003. The database includes defunct funds and funds that ceased to operate and, therefore, is free from survivor-ship bias.