Big hedge funds lose less in down markets than small ones

Mixed-chartHedge fund investors who want to limit losses in down markets should consider large hedge funds over small ones, according to research by analytics software provider PerTrac.

In the 41 months since 1996 in which hedge funds of all sizes had negative performance, the average large fund lost less than the average small one in 25 of the months, or 61% of the time.

The company also found that large hedge funds lost less, 2.63% on average, than small ones during 2011. Small funds lost an average of 2.78% while mid-sized funds lost 2.95%.

Small hedge funds were defined as having less than $100 million (€77 million) under management, large funds as more than $500 million and mid-sized funds in between.

“The findings suggest that investors interested in exposure to hedge funds and seeking to protect their wealth should examine funds with over $500 million in assets under management,” said Jed Alpert, managing director of global marketing at PerTrac.

However, though volatile, small funds tend to perform better in the long run. The average small fund outperformed the average large and mid-sized fund in 13 of the last 16 years, said PerTrac.