Dodd-Franking the hedge Funds

This paper analyzes hedge fund performance, risk, and fund flows before and after the implementation of the Dodd–Frank Act. The data indicates that, relative to non-US hedge funds, US hedge funds that are regulated under Dodd–Frank have lower fund alphas in the post-Dodd–Frank implementation period, both statistically and economically significant, while the evidence on its effect on risk (standard deviations and idiosyncratic risk) is mixed. We find evidence that there is more fund outflow (or less fund inflow) for certain US hedge fund strategies after the implementation of Dodd–Frank. We show some differences in these findings dependent on fund size and strategy. The findings are robust to difference-in-differences analyses comparing US to non-US funds.