A Bias-Free Assessment of the Hedge Fund Industry: A New Evaluation of Total Assets, Alphas, and the Flow-Performance Relation

Abstract

We combine data from six leading commercial hedge fund vendor databases with confidential regulatory filings to provide a comprehensive evaluation of hedge fund industry size, performance, and investor flows. We estimate that, as of 2019, the industry managed $6.0 trillion in worldwide net assets, 67% larger than the largest vendor estimate. Funds that report only via regulatory filings exhibit better risk-adjusted performance (“alpha”), stronger performance persistence, and a lower sensitivity of investor flows to past returns, relative to those reporting to vendor databases. Our results suggest that “non-vendor-listed” hedge funds have less fragile capital and higher alphas than publicly-marketed funds.

Keywords: hedge funds, net assets, gross assets, strategy, domicile, returns, flows

JEL Classification: G23, G28