Consistent with the argument that portfolio disclosure reveals trade secrets, a difference-in-differences estimation suggests a drop in fund performance after a hedge fund begins filing Form 13F as well as an increase in return correlations with other funds in the same investment style. The drop in performance is concentrated among funds with larger expected proprietary costs of disclosure, for instance, funds that disclose a greater fraction of their assets or hold more illiquid stocks. The drop in performance cannot be fully explained by alternative explanations such as decreasing returns to scale or mean reversion in fund returns.

We examine liquidity transformation by funds of hedge funds (FoFs) by developing a new measure, illiquidity gap, that captures the mismatch between the liquidity of their portfolios and the liquidity available to their investors. We find that higher liquidity transformation is driven by FoFs’ incentives to attract more capital and earn higher compensation. Greater liquidity transformation is associated with higher exposure to investor runs and worse performance during crisis periods. Finally, FoFs mitigate the risks associated with liquidity transformation by maintaining higher cash buffers.

We study a sample of Form 13F filings where fund advisors seek confidential treatment for some or all of their 13(f)-reportable positions. Consistent with the hypothesis that managers seek confidentiality to protect proprietary information, we find that confidential positions earn positive and significant abnormal returns over the post-filing confidential period. We also find that managers are more likely to seek confidential treatment of illiquid positions that are more susceptible to front-running. Overall, our analysis highlights important benefits of reduced disclosure that are relevant to the current policy debate on hedge fund transparency.

We study the effects of imposing repeated short-horizon regulatory constraints on long-term investors. We show that Value-at-Risk and Expected Shortfall constraints, when imposed dynamically, lead to similar optimal portfolios and wealth distributions. We also show that, in utility terms, the costs of imposing these constraints can be sizeable. For a 96% funded pension plan, both an annual Value-at-Risk constraint and an annual Expected Shortfall constraint can lead to an economic cost of about 2.5–3.8% of initial wealth over a 15-year horizon.

We use a unique data set of hedge fund long equity and equity option positions to investigate a significant lockup-related premium earned during the tech bubble (1999–2001) and financial crisis (2007–2009). Net fund flows are significantly greater among lockup funds during crisis and noncrisis periods. Managers of hedge funds with locked-up capital trade opportunistically against flow-motivated trades of non-lockup managers, consistent with a hypothesis of rent extraction in providing crisis era liquidity. The success of this opportunistic trading is concentrated during periods of high borrowing costs, in less liquid stock markets, and is enhanced by hedging in the equity option market.