Weiss: Hedge fund coverage needs to explain itself

Forbes.com columnist Gary Weiss pointed out on his blog that stories in the past two weeks from various news sources have printed contradictory numbers regarding the performance of hedge funds in 2006.

Weiss noted that Reuters reported that a hedge fund index from Credit Suisse reported that the average fund had a return of 13.8 percent for the year.

Weiss wrote, “But then we read that ‘Last week, Hedge Fund Research Inc., the first company to report industry data, said the average hedge fund gained 12.99 percent.’

“So which is it? 13.86% or 12.99%? That’s a significant difference, when you consider the sums of money involved.

“In fact, Reuters didn’t report that the Hennessee Hedge Fund Indices showed an even lower number for average fund performance, 11.36%. Hennessee found that emerging market funds climbed 13.18%, a staggering seven percentage points lower than the Credit Suisse/Tremont numbers.”

Later, Weiss concluded, “The media, I think, needs to be a bit more forthright in reporting on hedge fund industry performance. The press needs to emphasize that none of the hedge fund indexes are particularly reliable, as their contradictory numbers indicate. That’s because only hedge funds that wish to do so actually report their performance. That may skew the results positively, or negatively, but I am sure that it does skew the indexes.”

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