The key to understanding the risks and returns of hedge funds is the development of effective and useful benchmarks — benchmarks that help to assess past performance on a risk-adjusted basis and that helps to identify the current risk characteristics of hedge fund strategies. David Hsieh presents evidence on the information content and potential measurement biases in traditional hedge fund indexes. Furthermore, he discusses the development of a new risk-factor-based approach to constructing proxies for hedge fund benchmarks that are designed to capture forward-looking risk characteristics of particular hedge fund strategies, and finally, he analyzes the effectiveness of this new method.

Please note that text may be difficult to read in this recording. The presentation slides are available for download in the video player.