Hungry for a Hedge Fund’s Peak Performance? Catch It Early, Study Says

Hedge fund managers tend to have their best performance and lower volatility in the first three years following their launch, producing a 4% return premium when compared with the full lifecycle of the fund.

The strongest returns tend to come early, before asset growth and organizational complexity begin to dull the investment edges, according to a new whitepaper from Borealis Strategic Capital Partners, a hedge fund seeder.

And fundraising has remained a challenge for early-stage managers, with many this year launching with friends and family money, according to David Goldstein, director of fund services at STP Investment Services.

“If you’re coming out of a larger shop, [fundraising is] going to be a lot easier than if you’ve been trading stocks in your personal account for the past five years,” he said on a FundFire Exchange webcast. “Before you’re going to start attracting the really large checks, you need to get to $100 million and have a three-year track record. That’s been kind of the standard for the past several years, probably since the [2008] financial crisis, if not even before that. And I think that is still going to stick.”

Read the full article in FundFire.