Have Hedge Funds Added Value During the Last 24 Months? A Comparison of Italian and European Funds of Hedge Funds

This paper studies the Performances of Italian Fund of Hedge Funds (FoHFit), in comparison with those of Italian Funds of Mutual Funds (FoFit) and of a sample of European Funds of Hedge Funds (FoHFeu). The first objective is to build a methodology able to both deal with a limited number of data referred to a specific period of time and to obtain a judgment about the value added to investors by the FoHFit Industry. The judgment will be supported by the comparison of the results of actual competitors (the Italian Funds of Funds) and of virtual competitors (the European Funds of Hedge Funds) in the same financial environment. The comparison between the young Italian Hedge Fund Industry and the European Hedge Fund Industry will be particularly significant to delineate sensitive improvement points. The general methodology adopted follows four phases:* Defining the financial environment in which the Fund Managers performed their activity* Selecting a sample of Funds for each group (FoHFit, FoHFeu and FoFit) that was able to add value in the defined financial environment* Performing a risk/rewards analysis of these value added funds* Realizing a performance analysis of these funds to determine which risk factors and which strategies best explain the results of these value added funds