1.Why was Hedgefund.net created?
Hedgefund.net was launched as a "community of interest" for the alternative investment industry, where hedge fund managers and investors can come together to share ideas, views and information.

2. Why does Hedgefund.net use the S&P 500 for it's correlation calculations?
Although hedge funds trade a myriad of securities and use a variety of benchmarks, we have designated the Standard and Poors 500 Index as a benchmark for the correlation values Alpha, Beta, R, and R Squared for the vast majority of funds in the database. Most investors, when making a hedge fund investment decision, are comparing the returns of the hedge fund to the returns of the overall market regardless of the securities that a particular fund trades. Furthermore, if Hedgefund.net lists the Alphas for several funds, we must be sure that we are comparing all the funds to the same benchmark. If you are a registered user, please visit our glossary for more in depth information.

3. Are fund returns on HedgeFund.net Gross or Net of fees and expenses
Returns reported to HedgeFund.net are intended to be NET of all fees and expenses, including incentive fees. While most funds do not actually take their incentive fees on a monthly basis, they are asked to estimate it.

4. Can the returns posted on HedgeFund.net differ from the actual returns of the fund?
Annual and other periodic returns derived from the monthly numbers reported to HedgeFund.net may differ from the actual returns for various reasons. One reason might be transcription or input error on the part of the Manager. Another, might arise as a result of the timing difference between the accrual of management and incentive fees. Management fees are often accrued monthly while incentive fees can be accrued and paid annually. Under this scenario the posted monthly returns may not reflect the returns adjusted for the incentive fee to be paid at the end of the year. Most importantly, the individual manager data is provided to Hedgefund.net which it does not independently verify. Registered users should not rely upon Hedgefund.net data for the purpose of making an investment decision.

5. What are HFN Indices and how are they calculated?
HFN Indices are averages of all the funds in a particular strategy. First, for each month, we average the returns of all the funds in a given index. Then, we use that monthly return data stream to create return statistics for the index, including annual return, sharpes, alphas, etc.

6. How useful are the early years in an index?
Usually, the earliest years in an index are not very accurate because the index consists of relatively few funds. As more funds enter the index, the index returns are more accurate, and as a result, the most current data is also the most accurate for the index.

7. How useful is the most current monthly return?
The most current month only includes funds that have updated for that month. So, early in the month the index is often quite thin. For example, on February 2, only a handful of funds have updated their numbers for the month of January. By the 7th or 8th day of the month, there is generally a critical mass of funds reporting to justify an accurate result for the index.

8. Why do index returns decline farther into the month?
The HFN indices are calculated nightly based on the most current data. Over the course of the month, index performance generally gets weaker. (Example: on February 8th, an index may have gained 3.45% for the month of January. On February 25th, the same index now only gained 2.94%). This phenomenon generally occurs for three reasons:

1. Funds with excellent performance generally rush to report their returns. Therefore, the earliest results for an index tend to include funds that have performed well.

2. Fund of funds, which generally have lower returns than some single manager fund strategies due to diversification, report later in the month than single manager funds. They have to wait for every sub-fund's report before they can report for themselves.

3. Some "Market Neutral" funds also generally report later than other funds. These funds sometimes use a variety of derivative, illiquid or other securities that are difficult to price. These funds take several weeks to obtain pricing information for these securities. Since Market Neutral funds generally seek consistent returns, they often have lower positive returns than other funds.

9. What is "survivorship bias" and do HFN Indices have it?
Like many popular indices commonly used in other markets, Survivorship Bias results from the disappearance or elimination of failed funds. If these funds are not included in an index, the index is upwawrdly biased by the lack of that data since the index only includes funds that have survived.
Yes, HedgeFund.net indices have a survivorship bias. If a fund is shut down for whatever reason, it is removed from the HFN indices. HedgeFund.net does not try to correct Survivorship bias.

10. How are the indices weighted?
Each fund is equally weighted in HFN Indices. HFN Indices are not capital weighted by the asset size of a fund. Such weightings may not be an accurate representation of hedge fund performance. The largest 20 hedge funds account for over 70% of hedge fund capital and most of these 20 funds will not report returns to any database or other outside source.