Derivative use, fund flows and investment manager performance

Frino, Alex; Lepone, Andrew; Wong, Brad

doi:10.1016/j.jbankfin.2008.10.001

Cited by 30 publications

(3 citation statements)

References 27 publications

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“…Supplied by Refinitiv (formerly Thomson Reuters), a London Stock Exchange Group (LSEG) business, and sourced from the Thomson Reuters Tick History (TRTH) database, our analysis uses intraday trade and quote transactions data 1 Specifically, in relation to the permanent effect of trades at the time that they are executed, the evidence presented suggests that block trades are informed and concludes that "we do not find any simple effect of publication regime" (Gemmill, 1996(Gemmill, , p. 1781). 2 Frino and West (1999) provide evidence that informed traders are present in futures markets, while Frino et al (2009) identify a group of traders (hedgers) that are likely to be uninformed traders and significant users of futures contracts that are not present in equities markets. Frino et al (2004) identify a possible weakness in stock index futures stemming from their underlying index that limits their effectiveness to informed and uninformed traders.…”

Section: Data and Trade Directionmentioning

confidence: 99%

Reporting delays and the information content of off‐market trades

Frino

Galati

Gerace

2022

Journal of Futures Markets

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This paper examines the impact of reporting delays in off-market trades on informed trading and information efficiency. We examine this issue using a natural experiment in Financial Times Stock Exchange futures contracts provided by the Intercontinental Exchange, which eliminated the ability of market participants to request a delay in reporting smaller sized off-market trades in 2018. We find that, while reporting delays increase the time taken to release information to the market by the length of the reporting delay, thereby prima facie reducing information efficiency, such delays encourage informed trading and potentially increase the informativeness of trading and, therefore, information efficiency.

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Section: Data and Trade Directionmentioning

confidence: 99%

Reporting delays and the information content of off‐market trades

Frino

Galati

Gerace

2022

Journal of Futures Markets

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“…2 The study implies that hedge funds use options for informed trading as options holdings by hedge funds include more predictive power than their stock holdings. The use of equity index futures in turn is found to be important for mutual funds by Frino et al 3 as the study suggests that the futures may be used to manage fund flows more efficiently. Hedge funds, contrary to mutual funds, are well capable of restricting fund flows, and in this way manage their liquidity more efficiently.…”

Section: Introductionmentioning

confidence: 99%

On derivatives use by equity-specialized hedge funds

Peltomäki

2011

J Deriv Hedge Funds

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This study examines the performance and risk characteristics associated with derivatives use by equity-specialized hedge funds. For equity options, the results provide little evidence for profitability of the usage, but they are found to be associated with lower risk. Equity options are likely to be used for option writing strategies given their negative association with the skewness of hedge fund returns. For equity index futures, the results show evidence that the use of equity index futures is associated with lower performance as being substitute to share restrictions.

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“…As a proxy to derivatives investments, Chen (2011) considered dummies that differentiated the group of users and non-users and the types of derivatives employed. Frino, Lepone and Wong (2009) and Cici and Palacios (2015) restricted their studies to the markets of the future stock index and options. In contrast, all the analyses conducted in our study are supported by a database that allows us to explore different positions in derivative markets.…”

Section: Introductionmentioning

confidence: 99%

Opacity, Risk, Performance and Inflows in Hedge Funds

2020

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This article analyzes the relationship between opaque assets and the risks, returns and inflows of hedge funds. In particular, we use a unique dataset containing information required by a Brazilian regulator to evaluate the amount invested by funds in forward and future contracts, swaps and options in the context of qualified and non-qualified investors. Our results show a positive association between the positions in derivatives and the variations in risk and a negative association between derivatives (especially swaps) and the funds' monthly performances. This means that the use of more derivatives is related to higher risk (total and systematic) without the benefit of higher return. Hedge funds adopting leveraged operations with derivatives also present a lower annual performance. In general, there is significant evidence that swaps are related to fund inflows in a negative way with regard to qualified and non-qualified investors.

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Derivative use, fund flows and investment manager performance

Cited by 30 publications

References 27 publications

Reporting delays and the information content of off‐market trades

Reporting delays and the information content of off‐market trades

On derivatives use by equity-specialized hedge funds

Opacity, Risk, Performance and Inflows in Hedge Funds

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