29/09/2011
Younger and smaller hedge funds perform better
The most recent edition of a study entitled “Impact of Fund Size and Age on Hedge Fund Performance” by PerTrac confirms the conclusions of last year’s study (see Newsmanagers of 2 November 2010): small hedge funds with less than USD100m in assets in 2010 posted average returns of 13.04%, compared with 11.04% for mid-sized funds (with USD100-500m in assets) and 10.99% for funds with over USD500m. The trend has continued in the first six months of 2011. PerTrac has also found that younger hedge funds (less than two years old) made 13.25% last year, compared with 12.65% for funds which have been in existence for two to four years, and 11.77% for older products. In addition, younger funds appear to have made these returns with less risk than their older rivals. PerTrac suggests several reasons for the fact that younger hedge funds achieve better results. It may be due to the fact that they were able to make changes to their portfolios more rapidly, “under the coverage radar,” or due to the fact that their administrative and operational needs are slighter, and result in lower fixed costs. New technologies also probably allow them to operate more efficiently in more fast-moving universes.
