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April 19, 2005 at 08:00 PM
NEW YORK (HedgeWorld.com)–PrivateRaise LLC, the company that operates the equity-placements web site PrivateRaise.com, announced that it will expand the site’s coverage to include the hedge fund marketplace.
PrivateRaise.com will provide easy-to-use tools and performance metrics, according to the company’s announcement, and will make available a white paper that seeks to clarify the relationship between hedge fund returns and interest rates.
This white paper contends that too many analysts measure alpha simply by subtracting the risk-free interest rate from the fund return. More accurate results are obtained, it argues, by measuring fund returns as a multiple of the risk-free rate. This creates what it calls the excess return ratio. This statistic, the ERR, also can be used to measure the standard deviation of the data points, on a rolling 12-month basis, producing the ERR deviation.
“We believe the ERR deviation produces a more accurate picture of a fund’s return consistency by removing that portion of the volatility of a fund’s returns attributable to movements in the risk-free rate,” the paper states.
