White Papers continued

by Thomas Gimbel, Francis Gupta & Dan Pines

Profit making is more rampant among new mangers and declines with time.

Our findings show that it is more likely that new funds entering the industry were implementing new ideas. In addition, performance of funds is likely to settle with age.

--profit-making declines as a fund matures.

--the median younger manager not only outperforms a median older manager, but younger managers provide a better upside (75th percentile) and a better downside (25th percentile).

--younger funds were more successful in generating profits.

by Vikas Agarwal, Naveen Daniel and Narayan Naik (2004)

--funds with larger size and higher flows are associated with poor future performance. This finding suggests that hedge funds face decreasing returns to scale.

by Marcel Herbst / Harcourt AG