The quality of hedge fund performance data

The quality of hedge fund performance data is a subject which arouses considerable debate. This has been brought to the forefront again by the Madoff scandal. The hedge fund performance data used in this chapter come from the Credit Suisse/Tremont database and the historical data before 2008, particularly for the equity market neutral strategy, will be inflated to a degree by the fraudulent data submitted for the Madoff funds. The Credit Suisse/Tremont indices are asset weighted to show the performance of the average dollar invested in the Credit Suisse/Tremont sample for that strategy. Other index providers use a simple average of the returns of each fund (of whatever size) that qualifies for their index.