WO INVESTIEREN DISTRESSED-SECURITIES-HEDGEFONDS? EIN ASSET-BASED STYLE-FAKTORENMODELL

Abstract

This article analyses the systematic risks of distressed securities hedge funds. Four factors largely explain the systematic risk of this strategy group: These are the returns of two options strategies, i. e. (1) a short-put position on a stock index and (2) a short-straddle position on a bond index. Other factors are (3) a spread reflecting the return difference between a high-yield index and ten-year US Government bonds as well as (4) returns of stocks with low market capitalization. The risk-return-characteristics of distressed securities hedge funds can be represented by a linear combination of these four factors. In terms of its explanatory power, the asset-based style factor model is satisfactory with regard to the strategy return over time and can be used, for instance, to identify a stlye drift, i. e. a deviation from the declared investment style. Our results are relevant not only for investors, but also for supervisory authorities which are currently discussing options for regulation of such funds.