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Many tail-risk hedge funds posted astonishing gains during the March selloff, with at least one fund reporting a gain of over 3,000%. However, it's important for investors to read between the lines when it comes to choosing which hedge funds to invest in.
Whenever looking at the returns of any fund, especially tail-risk funds, it's important to make sure you're doing an apples-to-apples comparison by using the same measurement of returns across all the funds you're comparing.
Some tail-risk hedge funds report their returns in a different way than how most hedge funds report their returns, making it seem like their returns are much higher than they actually are compared to other funds.
In some cases, that 3,000% return may actually be more like 30% when switching to the same method for reporting returns that most hedge funds use. You may even discover that the fund that reported the 3,000% return underperformed its peers which reported using the standardized method for reporting returns.