The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

FM round-up: Are hedge fund databases trustworthy...

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. This means databases tend to track only the successful funds.

The report shows that the compounded annual return of the Tass database of hedge funds from 1995 to March 2004 was 16.64%. Without backfill, this figure was 14.74%. If dead funds are included, the figure was just 9.06%. The authors add that value-weighted indices are likely to have less severe biases. The HFRI Index and the CSFB/Tremont index returned roughly 13% over this period.

                                                                                                                                                         ...or hedge fund indices?

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree