Abstract: 

In recent years, China's hedge fund industry has experienced a boom. Hedge FOFs can serve as an efficient asset allocation tool for long-term institutional investors such as pension funds and insurance companies, highlighting the importance of the effective evaluation of hedge fund performance. This report investigates the quantitative evaluation methods and performance of the hedge funds in China. For each single metric the evaluation ability varies across different strategies. Even within a single strategy those of different metrics are inconsistent. By combining various metrics, this report proposes a new evaluation indicator, demonstrating strong predictability to future returns. Additionally, the fund portfolio formed by the indicator outperforms the Yinghua Award portfolio by approximately 25% in annualized returns, during the one-year period following the Yinghua Award announcement. This report provides some insights for the investment practice, and also contributes to the potential improvement of the evaluation system in the hedge fund industry.

Full text: Quantitative Evaluation of Hedge Funds in China