Research finds that small HF investment minimums equal small HF investment returns

Jan 29th, 2009 | Filed under: Academic Research, Editor's Pick, Today's Post | By:
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High minimum investment levels have always been a sign of exclusivity in the hedge fund industry. But does a higher minimum investment level mean a higher return? According to one study, the answer may be “yes”.

Kelvin Huang, a Ph.D. candidate at Canada’s leading business school – Queen’s University School of Business (disclosure) obviously spent a lot of time examining this relationship. His findings were published in December in his thesis “The Impact of Minimum Investment Barriers on Hedge Funds: Are retail investors getting the short end of performance.” (available here)

Before trying to figure out if big ticket funds have big ticket returns, Huang collected historical data on minimum investment levels from the CISDM database. As you can see from the chart below from his paper, the number of hedge funds with a $1 million+ minimum grew disproportionately between 1995 and 2005:


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