Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance

We examine the factors influencing published estimates of hedge fund performance. Using a sample of 1,019 intercept terms from regressions of hedge fund returns on risk factors (the alphas) collected from 74 studies, we document a strong downward trend in the reported alphas. The trend persists even after controlling for heterogeneity in hedge fund characteristics and research design choices in the underlying studies. Estimates of current performance implied by best practice methodology are close to zero across all common hedge fund strategies. Additionally, our data allow us to estimate the mean management and performance fees charged by hedge funds. We also document how reported performance estimates vary with hedge fund and study characteristics. Overall, our findings indicate that, while hedge funds historically generated positive value for investors, their ability to do so has diminished substantially.