Funds investing in illiquid assets report returns with spurious autocorrelation. Consequently, investors need to unsmooth these funds’ returns when evaluating their risk exposures. We show that funds with similar investments share a common source of spurious autocorrelation not fully resolved by traditional unsmoothing methods and thereby leading to underestimation of systematic risk. Thus, we propose a generalized unsmoothing technique and apply it to hedge funds and private commercial real estate funds. Our method significantly improves the measurement of funds’ risk exposures and risk-adjusted performance, especially for highly illiquid funds. Overall, the average illiquid fund alpha is lower than previously thought.

中文翻译：

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非流动性资金回报不顺畅

投资于非流动性资产的基金报告的回报具有虚假的自相关性。因此，投资者在评估风险敞口时需要对这些基金的回报进行非平滑化。我们表明，具有类似投资的基金有一个共同的虚假自相关来源，传统的不平滑方法无法完全解决这一问题，从而导致系统风险的低估。因此，我们提出了一种广义的非平滑技术并将其应用于对冲基金和私人商业房地产基金。我们的方法显着改善了基金风险敞口和风险调整后业绩的衡量，特别是对于流动性极差的基金。总体而言，非流动性基金的平均阿尔法低于之前的预期。