Sometimes size does matter.
When it comes to hedge funds, young and small aren’t synonymous, writes CNBC. Big hedge funds like Bridgewater Associates keep getting bigger, leaving smaller funds to market themselves as new and nimble to attract clients. About 85% of funds less than 2-years-old hold less than $250 million in assets, but of all the small funds, only about 14% are young. New funds are larger than they once were. About 13% of young funds are medium size, compared to 8% before the financial crisis.
Writes CNBC:
“Everyone thinks that small funds perform well, but we see that disappearing over time,” said Peter Laurelli, vice president of research at eVestment.
Age and size matter when it comes to performance. Young funds have outperformed older funds recently, but smaller funds have underperformed. According to eVestment, using Sharpe ratios, small hedge funds have underperformed medium-sized funds for the last six years. Performance changes comes from strategy and market differences post-financial crisis. And, of course, big funds don’t get big without doing something right.
Photo: LGO'Brien