Nordic Hedge Funds: An evaluation of the Nordic hedge fund market

Abstract: This paper is investigating the Nordic hedge fund market. The sample that has been used consists of 85 hedge funds from Sweden, Finland, Norway and Denmark. The first question to be answered is: Do Nordic hedge funds produce absolute returns without high correlation to the market? A single-factor and a three-factor regression model show that positive alphas are generated together with relatively low betas. Hence, the hedge funds give positive returns to a low correlation with the market. The second question is: Are there any differences in hedge fund performance between the Nordic countries? Based on Sharpe-ratios, Treynor-ratios and average returns the paper finds that there are differences between the Nordic countries. Norway is slightly outperforming Sweden, while Finland and Denmark are clearly lagging behind. The third question is: Do explanatory factors have influence on the performance of Nordic hedge funds? We find little evidence of explanatory value in the specific fund attributes. We find indications of that the level of incentive fee and the level of management fee are related to fund performance, though the results are not significant at a satisfying level.