Hedge fund closures to fall in 2010?
Jan 2nd, 2008 | Filed under: Hedge Fund Industry TrendsMuch of the research conducted on hedge funds relies on the fidelity of a small number of hedge fund databases that count on the voluntary reporting of returns by the world’s hedge fund managers. Due to the voluntary nature of these databases, one might be excused for wondering if managers’ decisions to either begin submitting data or to cease submitting data would have a material effect on the reported performance of the hedge fund industry as a whole.
The question of why hedge fund’s stop reporting data has recently come back to the fore with this article in the Fall edition of the Journal of Portfolio Management by Alex Grecu, Burton Malkiel and Atanu Saha. The idea underpinning the article has been around for a few years and was actually included in a presentation and paper submitted by the authors to the Atlanta Fed in late 2006 (see related posting).
They find that, like human life expectancy figures, the likelihood of death goes down with age - after a certain point. In other words, if hedge funds make it past the critical first few years, then they are quite likely to stay alive for the long term. The chart below shows the lifespan of hedge funds in the widely quoted TASS hedge fund database. (Note: funds that were still alive by April 2004, the date of the study, were treated as having a “duration” equal to their age by that date).
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[…] “In other words, if hedge funds make it past the critical first few years, then they are quite likely to stay alive for the long term.” (All About Alpha) […]
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