Why Hedge Fund Returns and Access Can Be Hard to Compare
Summary
The document responds to a question about finding a website where a British investor with modest capital could compare past performance of British and overseas hedge or mutual funds, while filtering by minimum investment. Its answer focuses on why hedge fund information and access may differ from those of public investment products. It cites limits on advertising and investor counts, high capital requirements, manager discretion over accepting investors, and the limited public availability of fund performance records.
The response also says that hedge fund investors must be accredited, and concludes that a public comparison site with the requested features would be difficult to build and of limited use. The answer is a broad explanation, not a directory of funds or a comparison method. Its regulatory statements are tied to the framework it describes and may not apply uniformly across jurisdictions, fund structures, or current rules; the question’s British setting is not specifically resolved.
Key ideas
- The response says hedge funds may restrict advertising and the number of investors they accept.
- Fund managers can control whether new clients are admitted.
- Hedge fund performance histories may not be publicly filed or consistently available.
- The regulatory and access claims are general and do not specifically resolve the British investor’s options.
Tags
Full text
# British hedge/mutual funds performance comparison website # British hedge/mutual funds performance comparison website Imagine a British investor with $10-100k in her pocket. She wants to see the previous performance of various British and overseas funds to choose the one to invest. And she wants to filter out the ones which accept minimum one million investment. Is there a website to help her to make the informed choice? ## Answer by chrisaycock (score 5) https://quant.stackexchange.com/a/1016 Your example shows a fundamental ignorance of how hedge funds operate: - Hedge funds cannot advertise and are limited to 499 investors. Given these restrictions plus the capital requirements to hold positions overnight, it is a virtual guarantee that a fund would not take an investment of $10K. - Hedge funds are usually LPs, which means that the GP (the asset manager) must accept a new client specifically. No one can just choose to invest in a hedge fund. (A couple hedge fund managers have publicly traded equity, but that's different from the underlying fund.) - Hedge funds are generally not required to publicly file their track record. Occasionally an investors' letter might leak onto the interwebs, but most fund managers consider the specifics of their P&L to be just as proprietary as their trading strategies. And one final item of note is that all investors must be accredited (ie, the investor must be wealthy already). So your premise doesn't really make any sense to begin with. Given the above regulatory framework, a website like what you've described is almost impossible to build and will definitely be useless if it even existed.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.