Large versus Small Hedge Funds

Abstract

The authors examine the returns of hedge funds and funds of hedge funds from 1994 to 1999 to determine whether the size of a fund affects its performance. Previous studies investigating this relationship for mutual funds have yielded mixed conclusions. Among academics, fund size is frequently cited as a deterrent to performance enhancement, especially when a substantial amount of cash is continually injected into the fund. The results of this study suggest that the size of a hedge fund or a fund of hedge funds has no impact on its performance.