Handbook of Hedge Funds

21

Databases, Indices and Benchmarks

A long-term investment is a short-term investment that performed badly.

Due to the private nature of hedge funds, it is relatively difficult to obtain adequate information about the operations of individual funds or reliable summary statistics about the industry as a whole. Hence, for a long time, gaining insight into the performance characteristics of the hedge funds was no simple matter. Quantitative and qualitative information on hedge funds has only recently become more readily available, thanks to the creation of hedge fund databases and indices.

21.1 HEDGE FUND DATABASES

Since hedge funds cannot advertise, being included in a database and therefore on the radar screens of consultants is very important in terms of visibility. Thus, many hedge funds release monthly return information to specialized databases, such as Hedge Fund Research, TASS and Altvest. These databases collect information, and then sell it back to anyone interested in buying it — accredited investors, banks, funds of funds, consultants, and even lucky academics. Some of these data consumers may at some point become hedge fund investors, and this is the major motivation for managers to give out information on a consistent basis.

Most of the large data vendors provide additional services, ranging from fund selection and screening to asset allocation and product structuring. In addition, they use their databases to calculate a number of hedge fund indices that are widely ...