The Sustainability of Hedge Fund Performance : New Insights

This study analyses and decomposes hedge fund returns in order to determine a systematic hedge fund selection criterion that enables investors to consistently and significantly outperform equity and bond indices over a full market cycle and over bull and bear market conditions. The methodology used is adapted from Capocci and Hübner (2004). The measures used include the returns, volatility, Sharpe ratio, alpha, beta, skewness, kurtosis and an adapted Sharpe ratio. Measures incorporating the volatility display very strong ability to assist investors in creating alpha as well as consistently and significantly outperforming classical indices