A closer look at the “surprisingly small” change in hedge fund numbers last year
Apr 7th, 2009 | Filed under: Editor's Pick, Today's Post
There are nearly a dozen commercial hedge fund databases in existence today. As most practitioners and academics are painfully aware, the voluntary nature of these databases means that they are susceptible to various widely-reported biases. For example, since databases only track funds that currently exist, they necessarily ignore the historical returns of funds that no longer exist. In addition, since the decision to report to a database remains at the discretion of the manager, only funds they consider worthy of publicizing are included. Funds that started off poorly are apt to be shut down or folded into another fund before they ever hit the radar screens of hedge fund databases.
Many funds only report their returns to one database. A small minority report to 3 or more. In fact, a 2005 study (see related post) found that only 3% of hedge funds reported to all of the five largest databases. As a result of this, each database is forced to extrapolate its results across the entire hedge fund universe.
But there is one company that, by virtue of its unique business model, is able to see across all sources. That company is Pertrac, a provider of performance analytics software that maintains relationships with all hedge fund databases. More…
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