Do Size and Age Affect Hedge Fund Returns?

Start-up managers lucky or skillful enough to earn outsize returns early in life report to databases; unlucky start-ups fail in obscurity.

Is it true that it is easier for hedge fund managers to generate higher returns when they run less money? Moreover, why is it that we often meet these managers only after they have produced such results, by which time their live returns often lag their historical track records? Why are hedge fund returns widely thought to be higher when funds are new? Does a fund’s age or its asset size really influence returns?

These questions have become increasingly important as large institutional investors, themselves often...

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