Large hedge funds outperformed small ones from 2008 to 2011, but all sizes of funds posted negative performance results during this timeframe, according to a study by PerTrac.
"Impact of Size and Age on Hedge Fund Performance: 1996-2011" used 15 leading global hedge databases to analyze the 2011 hedge fund universe, which showed that large funds dipped 2.63 percent on average in 2011, compared to a 2.78 percent dip among small funds and a 2.95 percent slide on the part of medium-size funds.
Large funds also maintained lower annualized volatility statistics relative to small funds. Small funds are defined as any fund with less than $100 million in assets under management. Mid-size funds are those with between $100 million and $500 million in assets under management and large funds have more than $500 million in assets under management.
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"The findings suggest that investors interested in exposure to hedge funds and seeking to protect their wealth should examine funds with over $500 million in AUM, since the average large fund has had lower losses in negative performance years and lower annualized deviation figures compared to the average small fund," said Jed Alpert, managing director of global marketing at PerTrac.
Investors with a higher volatility appetite and seeking to maximize returns should consider funds with less than $100 million in AUM, since the average small fund has outperformed the average mid-size fund and average large fund in 13 out of the last 16 years, the study found.
The study also examines the impact of fund age on performance and shows that the cumulative return for the average young fund is 827 percent, since 1996, nearly double that of the 446 percent return for mid-age funds and well beyond the 350 percent posted by tenured funds.
The report further shows that it has been an uneven journey. The average young fund has had 144 positive and 48 negative months since 1996, mid-age funds have had 136 positive and 56 negative, while tenured funds have had 129 positive and 63 negative. The study defines a fund as "young" if its start date was within the last two years, "mid-age" if it commenced within the last two to four years, and "tenured" if it has been operating beyond four years.
PerTrac provides software solutions for investment professionals at the fund-level of investing, including pensions, family offices, hedge funds, long-only managers, endowments, sovereign wealth funds, funds of hedge funds and industry service providers.
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