A report from Ibbotson Associates indicates that the returns reported in hedge fund databases are often much higher than they should be because of backfill bias and survivorship bias.
Backfill bias occurs because many hedge funds include unreported performance to data collectors when they first start reporting returns; they typically report only favourable early returns, says the report.
Survivorship bias occurs because when a fund fails it is removed from a database along with its performance history.
Thanks for your interest in Euromoney!
To unlock this article:
