The secret behind Pentium Quantitative’s phenomenal performance this year is a software it developed that helps its manager, Vicente-Andres Zarazoga, separate hedge fund talent from the lucky strikers. Thanks to the software, the fund of hedge funds has seen returns soar 26.2%, more than four times the FoHF average of 6.5%; last year’s 16.2% was more than double the average of 7.5%. “The pattern of historical performance will tell us very quickly if [the HF manager] is hedging or if he is running a gambling casino,” Zarazoga told Bloomberg News. “With hedge funds, an investor is looking for protection.” His investment philosophy also helps; rather than looking for the big killing, he is satisfied with smaller, consistent gains – a mathematical phenomenon called “negative kurtosis.” Zarazoga, whose software examines data from 400 portfolios to help select managers, and devise a business plan. For example, the software -- two years in the making and three years in use – has helped detect that foreign-exchange hedge funds had a negative correlations with the S&P500 index, and so that made for a good bet.  His approach makes investors happy and him more comfortable about taking the oft-criticized FoHF industry-wide fees of 1.5% for management and 15% for performance. “Yes, it does cost more,” Zarazoga said in the BN interview. “But it just feels better knowing that your life – or your money – is well tended to. Don’t think of the costs. Think of the results.”