By Will Wainewright, Bloomberg,
Smaller hedge funds outperform larger ones, especially during times of market turmoil, research published by London’s City University showed.
The report by the university’s Cass Business School analyzed the performance of 7,261 funds from 1994 to 2014.
“On average investors were better off investing with a small hedge fund instead of a large one in times of crisis,” said researchers Andrew Clare, Nick Motson and Dirk Nitzsche. Smaller hedge funds performed better because they placed more restrictions on investor redemptions and investments were less correlated to market risk, they said.
The research also found a negative relationship between hedge fund age and performance.
“This result indicates that hedge fund managers do not age well,” it said.