Performance of Emerging Market Hedge Funds in Their Geographical Focus

Abstract

Emerging market hedge funds are an asset class which does not seem to outperform the market benchmarks although a significant amount of the funds show superior performance. In this study, we examine whether funds selected on their geographical focus are able beat their benchmarks, and show aggregate market timing ability in their focus market. Our results suggest that emerging market hedge funds are able to beat their benchmarks but do not show market timing ability. In conclusion, emerging market hedge funds are an asset class in which unskilled managers seem to infiltrate to earn fees but investors can mitigate this problem by investing in emerging market hedge funds which have a defined geographical focus.