Why You Shouldn’t Judge a Hedge Fund by Its Name

  • Such funds have lower returns and may shutter sooner: report
  • Paper finds gravitas reflects influence, seriousness, power

What’s in a name? For hedge fund investors, sometimes a warning sign.

Hedge funds often choose names with words that reflect authority, stability and power — i.e. words with gravitas. Now a report from researchers at the University at Buffalo and Finland’s University of Oulu finds that investors should beware.

Funds with gravitas-laden names “have lower returns, alphas, sharpe ratios and manipulation-proof performance measures, higher volatilities and maximum drawdowns as well as higher probabilities of extinction than the funds with lower name gravitas,” according to the report, which examined nearly 18,000 hedge funds globally that on average manage about $160 million. These funds also tend to charge higher management fees and lower incentive fees…

Why You Shouldn’t Judge a Hedge Fund by Its Name

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