Hedge funds: Attrition, biases and the survivor premium

Robert J. Bianchi*, Michael E. Drew

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

1 Citation (Scopus)


This paper examines the Lipper/TASS hedge fund database for the period 1994-2006 and we calculate hedge fund attrition, biases and the survivor premium. We estimate an attrition rate of between 9 to 10.5 per cent per year which is twice the rate reported in mutual fund studies. We measure the various hedge fund biases and we find that database returns in this sample are inflated by as much as 38 per cent. We find that the common characteristic of non-survival is chronic poor performance. Finally, we estimate the survivor premium which is the return investors receive if they are skilled or lucky enough to invest exclusively in surviving hedge funds only. After controlling for data biases, we calculate a hedge fund survivor premium of nearly 600 basis points per year, which is twice the size of those reported in mutual fund studies. Finally, we reveal that the survivor premium increases to 821, 728 and 621 basis points per year when examining funds in the Managed Futures, Global Macro and Long/Short Equity Hedge investment categories, respectively.

Original languageEnglish
Title of host publicationThe recent trend of hedge fund strategies
EditorsYasuaki Watanabe
Place of PublicationNew York
PublisherNova Science Publishers
Number of pages24
ISBN (Electronic)9781612091075
ISBN (Print)9781616683382
Publication statusPublished - 2010


  • Attrition
  • Data biases
  • Hedge funds
  • Investment style
  • Survivorship


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