As hedge funds become increasingly mainstream, their performance and returns regularly popup in the investment landscape. The industry's performance is usually measured by one of the dozen or so hedge fund indices that have sprung up in recent years. But what exactlyare the indices measuringin this largely privateindustry?
The returns cited usually differ slightly from each other, depending on which index you consult. In a typical example, the Credit Suisse/Tremont index cites the return for short sellers as negative 7.2 per cent for the year to the end of November 2006, while the Hedge Fund Research (HFR) index cites the return for short sellers as negative 3.0 per cent in the same period. The same sort of discrepancy is found in almost every category and index.