Understanding Hedge Fund Performance

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Abstract
This article is the first of a two-part review of various micro (fund) and macro (strategy) factors that impact fund performance. In this part, the authors concentrate on reviewing some of the micro (e.g., fund level) elements driving fund performance. Specifically, they analyze the impact of fund characteristics such as survivor bias, age, and size on the fund's performance. In some cases, the results presented in this article seem to question previous results such as the impact of stale prices on return relationships, survivor bias, the use of historical hedge fund index data, and incentive fees. In other cases, the results support previous research on issues such as performance persistence, lock-ups, and a number of other micro/fund effects.

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