The Alpha and Beta of Equity Hedge UCITS Funds: Implications for Momentum Investing

Nabil Bouamara*, Kris Boudt, Benedict Peeters, James Thewissen

*Corresponding author for this work

    Research output: Chapter in Book / Report / Conference proceedingChapterAcademicpeer-review

    Abstract

    Alternative UCITS is a pan-European regulatory framework that allows investment vehicles to be managed and sold throughout Europe. The unified fund structure provides retail investors access to a blend of sophisticated active management strategies subject to high liquidity and transparency constraints, which are ensured by regulatory oversight. The introduction of alternative UCITS funds under the UCITS III Product Directive fits in the so-called "retail alternatives phenomenon". The client base of alternative investments (apart from long-only allocations to equity and bonds) is increasingly composed of retail investors seeking absolute return investments characterized by low volatility, decorrelation with broad market movements and exposure to alternative risk. Accordingly, the combined effect of strong efforts in investor-favorable regulation when investing in the hedge fund industry and a thematic shift in the mindset of the investor desiring hedge fund-like returns led to a substantial increase in terms of the number of alternative UCITS funds, assets under management (AuM) and market depth. In March 2017, the LuxHedge database reports a UCITS universe of €420 billion AuM across 1,380 funds operating under 16 distinct strategies.

    Original languageEnglish
    Title of host publicationFactor Investing
    Subtitle of host publicationFrom Traditional to Alternative Risk Premia
    PublisherElsevier
    Pages415-446
    Number of pages32
    ISBN (Electronic)9780081019641
    ISBN (Print)9781785482014
    DOIs
    Publication statusPublished - 9 Oct 2017

    Keywords

    • Alternative UCITS
    • Factor model approach
    • Factor model specification
    • Fund performance
    • Peer performance
    • Risk factor analysis
    • Style-based analysis
    • UCITS fund structure

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