Hedge funds were better (as measured by Sharpe ratio/information ratio/Jensen’s alpha) from 1991-2000 than they were 2000-10 and *much* better than 2011-20. Why? Partly because markets were less efficient and strategies like “buying cheap companies” or
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“buying companies with consistent profits” were less well known and could generate decent returns on their own. But an under-appreciated factor is that it was much easier back then to value your book with stale marks, which mechanically leads to
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both lower volatility and lower beta to your benchmark, both of which inflate your risk-adjusted performance figures. You could even manipulate your marks to make drawdowns look smaller. The “good old days”.
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