Bontschev, GeorgiGeorgiBontschevEling, MartinMartinEling2023-04-132023-04-132013-08-01https://www.alexandria.unisg.ch/handle/20.500.14171/8891610.1057/jdhf.2013.12We present a four factor model to replicate distressed securities hedge fund returns. The model considers the returns of short put options, a short straddle on bonds, the spread between high yield and Treasury bonds, and stocks with small market capitalization. On the basis of this model, we conduct a multivariate analysis of how fund characteristics affect risk-adjusted performance. A high-water mark and performance-based compensation are positively related to risk-adjusted performance, which is in line with much of the hedge fund literature. In contrast to other work, however, we find that lock-up is negatively related to performance and that fund age is unrelated to performance. Our work provides a better understanding of the nature and critical factors for the success of distressed securities hedge funds.enHEDGE fundsCAPITAL investmentsMARKET capitalizationCOMPOSITE indexes (Finance)DISTRESSED securitiesMULTIVARIATE analysisGOVERNMENT securitiesjournal article