Hedge Funds Performance

Dispersion of returns highest in decade as volatility increases


In addition to being hedge funds' worst year ever, 2008 also turned out the most dispersed returns of any year since 1999. An analysis of monthly hedge fund returns in the Absolute Return database shows that outliers - funds with returns higher or lower than one standard deviation of the mean - declined steadily from 1999 to 2004. In 2005, dispersion of returns began to widen and last year blew back out to 1999 levels.

Standard deviation, which measures the dispersion of data around an average value, shows that two-thirds of funds in the Absolute Return database -