Only 3% of Hedge Funds in All Five Major Databases
Feb 21st, 2007 | Filed under: Hedge Fund Industry TrendsProfessor Bill Fung, Visiting Professor at the London Business School tipped us off about this fascinating graphic last week. It’s almost 2 years old now, but its message likely remains as relevant as ever: there is no one reliable snapshot of the hedge fund universe. According to research done at London Business School, only 3% of hedge funds appeared in all five major hedge fund databases.
Fung and Duke’s David Hsieh explain in a Q4 2006 report for the Atlanta Fed, that…
“While many hedge funds report to only a single database, some hedge funds report to more than one database. An ongoing project at the BNP Paribas Hedge Fund Centre of the London Business School is merging several databases to achieve a comprehensive picture. A great deal of effort has been expended to obtain an accurate assessment of the statistical characteristics of the hedge fund industry, eliminating the risk of double counting due to the lack of a uniform reporting standard in the industry. At the completion of this project, we will have one of the most comprehensive academic hedge fund databases to work with.”
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has anyone asked questions about whether the total assets respresented by these databases actually tally with the hedge fund universe
should also be noted that this data was collected 2 years ago, the database business has become more competative since then and these databases represented are much larger.
Basically- the above ven just isn’t right
[…] The study confirms earlier research presented by Professors Bill Fung and David Hsieh showing that few hedge funds report to more than one or two databases. According to PerTrac: “…relatively few hedge funds and fund of hedge funds report to more than two or three databases, and almost none report to all twelve databases. In fact, a significant number of hedge funds and FOFs, more than 5,000 in the twelve-database sample, appeared only in a single database…No single hedge fund database covers even half of the identified distinct investments.” […]
[…] High Attrition: Easterling points out that the supposed excessive failure rate of hedge funds is a product of the databases to which many funds report. He says that poor performing hedge funds may cease to voluntarily report their numbers, but that doesn’t mean they go bankrupt. Unlike the mutual fund industry, where public disclosure is required, hedge funds can begin or cease reporting as they please. So it’s a stretch to conclude that all non-reporters actually failed - especially when the average hedge fund reports to one or two of 10 or more databases.  […]
[…] “Hedge funds grew 14.5% in 2007″:  Investment News takes a more positive view of the industry, but also suggests that hedge fund databases are suspect: “For financial advisers and potential hedge fund investors, the patchwork system of about a dozen primary database firms can serve as an initial research tool and screening mechanism. Beyond that, critics charge, the databases all fall short for reasons ranging from their incompleteness to the voluntary nature by which fund and manager information is gathered.” (see related posting on this ”patchwork”) […]