Hedge Funds Investments After Strong Returns Not Advised

Institutional hedge fund allocators shouldn’t chase performance, as a study statistically shows that investing after high watermark performance typically underperforms the average of hedge fund performance going forward. Further, hedge fund performance evaluation windows of 3 to 5 years may not be ideal to properly evaluate beta market environment changes that impact various strategies. With the equity bull market several years old, hedge fund investors should be particularly diligent about properly identifying beta-driven returns, concludes a study on hedge fund selection.

Hedge funds: Fund manager selection based on identifying alpha

The study from Commonfund,...