The study, which utilises 15 leading global hedge databases, including five distinctive dead hedge fund databases to analyse the 2011 hedge fund universe, also shows that the large funds dipped 2.63% on average in 2011, the least when compared to small funds’ 2.78% and mid-size funds’ 2.95% slides. Large funds also maintained lower annualised volatility statistics relative to small funds. The study defines a fund as “small” if its assets under management (AUM) are less than $100 million, “mid-size” if assets are between $100m and $500m, and “large” if assets managed exceed $500m.
Investors with a higher volatility appetite and seeking to maximise returns should consider funds with less than $100m in AUM, since the average small fund has outperformed the average mid-size fund and average large fund in 13 out of the last 16 years.
The study also examines the impact of fund age on performance and shows that the cumulative return for the average young fund is 827%, since 1996, nearly double that of the 446% return for mid-age funds and well beyond the 350% posted by tenured funds. The report further shows that it has been an uneven journey. The average young fund has had 144 positive and 48 negative months since 1996, mid-age funds have had 136 positive and 56 negative, while tenured funds have had 129 positive and 63 negative. The study defines a fund as “young” if its start date was within the last two years, “mid-age” if it commenced within the last two to four years, and “tenured” if it has been operating beyond four years.
For more information on PerTrac’s Impact of Size and Age on Hedge Fund Performance: 1996 – 2011, click here.
