Citation

Discussion Paper Details

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Full Details

Title: Financial Conglomerate Affiliated Hedge Funds: Risk Taking Behavior and Liquidity Provision

Author(s): Francesco Franzoni and Mariassunta Giannetti

Publication Date: May 2017

Keyword(s): Financial Conglomerates, Hedge Funds, Liquidity Provision and Volker Rule

Programme Area(s): Financial Economics

Abstract: This paper explores how affiliation to financial conglomerates relates to hedge fundsâ?? funding and risk taking. We find that financial-conglomerate-affiliated hedge funds (FCAHFs) have more stable funding than other hedge funds. This may explain our finding that FCAHFs are able to take more risk and to purchase less liquid and more volatile stocks than other hedge funds during financial turmoil. In good times, instead, FCAHFs expand their assets less than other funds and are less exposed to systematic risk. Thus, FCAHFs perform a stabilizing function for the financial system, even though they do not generate higher returns for their investors.

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Bibliographic Reference

Franzoni, F and Giannetti, M. 2017. 'Financial Conglomerate Affiliated Hedge Funds: Risk Taking Behavior and Liquidity Provision'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12040