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Performance Characteristics of Hedge Fundsand Commodity Funds: Natural vs. SpuriousBiases

Published online by Cambridge University Press:  06 April 2009

William Fung  and
David A. Hsieh
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Abstract

It is well known that the pro forma performance of asample of investment funds contains biases. Thesebiases are documented in Brown, Goetzmann, Ibbotson,and Ross (1992) using mutual funds as subjects. Theorganization structure of hedge funds, as privateand often offshore vehicles, makes data collection amuch more onerous task, amplifying the impact ofperformance measurement biases. Theis paper reviewsthese biases in hedge funds. We also propose usingfunds-of-hedge funds to measure aggregate hedge fundperformance, based on the idea that the investmentexperience of hedge fund investors can be used toestimate the performance of hedge funds.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 3 , September 2000 , pp. 291 - 307
Copyright
Copyright © School of Business Administration, University of Washington 2000

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Footnotes

*

Fung, Partner, PI Asset Management LLC, GardenCity, NY 11530; and Hsieh, Fuqua School ofBusiness, Duke University, Box 90120, Durham, NC27708. The authors acknowledge research supportfrom the Duke Global Capital Markets Center andhelpful comments from Howard Wohl, Stephen Brown(the editor), David Ravenscraft, and an anonymousreferee.

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