Hedge fund performance is primarily due to chance.
The retrieved literature presents mixed partial evidence regarding hedge fund performance, with some studies pointing to declining alpha estimates near zero while others identify evidence of deliberate manager skills and exposure-based returns.
rails:sufficiency:partial_only:for=0+0p:against=0+3p | v55:multi_partial_one_side:lean=lean_partial:against:one_sided
The Right Place for Alternative Betas in Hedge Fund Performance. 2006. https://doi.org/10.3905/jai.2006.640263
In recent months, concerns have been raised about the profitability prospects for hedge funds. This article argues that market participants9 pessimistic view of the hedge fund industry9s capacity to generate long-term returns is a direct result of their continued focus on alpha. It illustrates the importance of considering not only the exposure to the market (the traditional beta), but also other exposures (the alternative betas) to characterize alternative sources of hedge fund returns. It also revisits the capacity issue by distinguishing between market capacity and manager capacity. The results show that alternative betas are an important source of hedge fund returns that reduce the importance of alpha. The authors conclude that capacity issues do not significantly impact alpha by illustrating that alpha is generated by successful bets on numerous exposures rather than by exploiting market opportunities. <b>TOPICS:</b>Real assets/alternative investments/private equity, performance measurement The Right Place for Alternative Betas in Hedge Fund Performance | Portfolio Management Research Skip to main content The Right Place for Alternative Betas in Hedge Fund Performance Walter Géhin Mathieu Vaissié The Journal of Alternative Investments Summer 2006, 9 ( 1) 9 - 18 DOI: 10.3905/jai.2006.640263 Download PDF To download content, you need to upgrade your trial to full subscription. Please contact your account manager to do this. Add to Favorites Please log-in to or register for your personal account in order to save a bookmark. Log-in/register Share Close Share this article Close Labels Please log-in to or register for your personal account in order to apply a label. Log-in/register Close Previous Next Back to top Related Articles Equalization of Performance-Based Fees Authors: François-Serge Lhabitant Journal: The Journal of Alternative Investments Issue: Volume 29, Issue 1 Published: 01 July 2026 Expand Article Collapse Article Fund of Funds (FoF) Construction under the Alliance of PolyModel Theory and Modern Machine Learning Methodologies Authors: Dan Wang, Siqiao Zhao, Zeyu Cao and Raphael Douady Journal: The Journal of Financial Data Science Issue: Volume 7, Issue 4 Published: 03 November 2025 Expand Article Collapse Article Retail Hedge Funds Authors: Andrew J. Sinclair and Chuyi Zhang Journal: The Journal of Alternative Investments Issue: Volume 28, Issue 3 Published: 02 January 2026 Expand Article Collapse Article Article Topics Portfolio Management in Theory and Practice Performance Measurement Asset Classes Alternative Investments Hedge Funds
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Performancemåling af nordiske hedgefonde. 2008. https://research.cbs.dk/en/studentProjects/9afa38ee-e4cf-4eea-9cc0-0a08f56f876b
The objective of this thesis is to cover the main characteristics of the Nordic hedge funds and thereby making it possible to determine suitable performance measures. Furthermore fund manager skills are evaluated, based upon regressions calculating alpha. Finally we seek to find fund specific explanatory factors to explain the presence of alpha. Performance measurement of Nordic hedge funds is not a well documented subject. Previous studies of appropriate measures have primarily been focussing on American fund returns. The Nordic hedge fund industry is very young compared to the global industry. This is primarily due to the legislature in the Nordic countries, which has not allowed the creation of hedge funds until recent years. Traditional performance measures are based on the assumption that returns are normally distributed. Subsequently risk is solely defined as volatility or market beta, meaning risk will be significantly underestimated unless the assumption of normal distribution is fulfilled. In this thesis it is shown that the returns of hedge funds are in fact not normally distributed making the results of traditional performance measures questionable. We therefore find that measuring performance should be based on non-normality. However we also find that the overall ranking of the funds is not affected by the choice of measurement unless there are substantial deviations from normality. The nature of hedge funds is complex. The use of equities, future contracts, fixed
The effectiveness of hedge fund strategies and managers’ skills during market crises: a fuzzy, non-parametric and Bayesian analysis. 2012. http://hdl.handle.net/10210/8083
Ph.D. This thesis investigates the persistence of hedge fund managers’ skills, the optimality of strategies they use to outperform consistently the market during periods of boom and/or recession, and the market risk encountered thereby. We consider a data set of monthly investment strategy indices published by Hedge Fund Research group. The data set spans from January 1995 to June 2010. We divide this sample period into four overlapping sub- sample periods that contain different economic market trends. We define a skilled manager as a manager who can outperform the market consistently during two consecutive sub-sample periods. To investigate the presence of managerial skills among hedge fund managers we first distinguish between outperformance, selectivity and market timing skills. We thereafter employ three different econometric models: frequentist, Bayesian and fuzzy regression, in order to estimate outperformance, selectivity and market timing skills using both linear and quadratic CAPM. Persistence in performance is carried out in three different fashions: contingence table, chi-square test and cross-sectional auto-regression technique. The results obtained with the first two probabilistic methods (frequentist and Bayesian) show that fund managers have skills to outperform the market during the period of positive economic growth (i.e. between sub-sample period 1 and sub-sample period 3). This market outperformance is due to both selectivity skill (during sub-sample period
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