The latest research by Preqin into hedge fund performance finds that as of the end of August, large hedge funds – those with AUM of USD1 billion or more – posted the greatest returns of any size category.
They outperformed emerging, small and medium funds for the month (with -1.49 per cent returns), as well as across the 12-month (+4.30 per cent), 3-year annualised (+9.06 per cent), and 5-year annualised (+8.52 per cent) horizons. They also had the lowest 3-year volatility of any size class, of only 3.29 per cent. Emerging hedge funds, those with AUM of less than USD100 million, had the lowest returns across all horizons, as well as the highest volatility.

“The release of the Preqin’s new fund size benchmarks allows hedge funds to be compared more accurately with their peers,” says Amy Bensted, Head of Hedge Fund Products at Preqin. “While benchmarking funds by geography or strategy can provide insight into macro-trends in the industry, the performance of the smallest and largest funds within those categories can differ wildly.

“Large funds, those with USD1bn or more in assets under management, have consistently generated outperformance in both the short and long term when compared to smaller sized hedge funds. Furthermore, these funds have posted superior average returns while also maintaining lower volatility and higher Sharpe ratios over multiple time horizons. However, the highest performing funds of smaller sizes can generate returns greater than their larger counterparts, which means that smaller hedge funds can still hold much appeal for investors.”
