Related Return Patterns Adjustment Under the Impact of COVID-19 on Hedge Funds

The latest threat to global health is an ongoing outbreak of a respiratory disease known as COVID-19 and has become a global concern. The exponential spread of the COVID-19 pandemic shook up global markets and caused major adjustments to the world economy. In this paper, we investigate whether these changes affected hedge fund return patterns. We decompose hedge fund index returns into Fama-French factors using data from 2017 – 2019 and compare it to decompositions using data from 2020 and 2021 to date. Our empirical results suggest that the Fama-French factor exposures changed on the conventional hedge funds. This has reflected that COVID-19 has an impact on the return patterns of the hedge funds we selected. The findings have implications for investors and major players in the investment markets. Our research is useful for predicting how the performance of hedge funds changes in market disruption.