University of Oulu

Nicolas P.B. Bollen, Juha Joenväärä & Mikko Kauppila (2021) Hedge Fund Performance: End of an Era?, Financial Analysts Journal, 77:3, 109-132, DOI: 10.1080/0015198X.2021.1921564

Hedge fund performance : end of an era?

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Author: Bollen, Nicolas P. B.1; Joenväärä, Juha2; Kauppila, Mikko3
Organizations: 1Vanderbilt University, Nashville, Tennessee
2Aalto University, Helsinki, Finland
3University of Oulu, Oulu, Finland
Format: article
Version: accepted version
Access: embargoed
Persistent link:
Language: English
Published: Informa, 2021
Publish Date: 2022-12-10


This article documents a decline in aggregate hedge fund performance over the past decade. We tested whether a set of prediction models can select subsets of individual funds that buck the trend and subsequently outperform. Two of the predictors reliably picked funds that lowered the volatility and raised the Sharpe ratio of a multi-asset-class portfolio relative to a stock/bond portfolio over the full 1997–2016 sample. Hedge fund allocations reduced volatility in two subperiods but failed to improve the Sharpe ratio from 2008 onward. We explore potential explanations for the erosion of hedge fund performance.

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Series: Financial analysts journal
ISSN: 0015-198X
ISSN-E: 1938-3312
ISSN-L: 0015-198X
Volume: 77
Issue: 3
Pages: 109 - 132
DOI: 10.1080/0015198X.2021.1921564
Type of Publication: A1 Journal article – refereed
Field of Science: 512 Business and management
Copyright information: This is an Accepted Manuscript of an article published by Taylor & Francis in Financial Analysts Journal on 10 Jun 2021, available online: