CHAPTER 11Is Smaller Better in Hedge Funds?

Much ink has been spilt about the relationship between hedge fund size and performance. As the claims for the superiority of hedge fund returns come under increasing attack, the superior performance of smaller funds has become a mantra, as witnessed by the dozens of investment programs geared toward this tiny niche of the hedge fund world.

The discussion is complicated by the fact that smaller funds tend to be “emerging” or “newer managers.” The two designations often overlap, although there are small funds that have been in existence long enough so they are no longer considered emerging. However, in this book, we will use the two interchangeably unless there is a reason to treat them separately. While ...

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