Dynamic Benchmarking to Estimate Active Manager Skill

Who We Are

This site was built by Magnitude Capital, a New York-based alternative investment manager.

Why Are We Doing This?

Magnitude invests in hedge funds with the goal of capturing skill-based returns that are largely independent of moves in broad asset classes like equities or credit. Consequently, we spend a lot of time thinking about how to separate active skill (alpha) from market exposure (beta) when taking the measure of a manager’s track record. We have observed over the years that not everyone evaluates performance this way. We built this tool so that, should they wish, investors can look at their portfolios in a manner similar to the way we examine our own.

A few words of caution. In creating this site, we’ve prioritized simplicity and ease of use. While we believe that evaluating manager skill relative to a beta-matched benchmark is useful, the approach to doing so adopted by this tool is quite basic. Second, this tool is entirely backward-looking, and while we believe in the value of assessing historical performance (including historical active manager skill), past performance and skill cannot be relied upon as predictive of future performance or skill. Successful hedge fund investing requires many more resources and tools than we provide here. Measuring outcomes with sensible benchmarks is important, but it’s only a starting point.

We hope you find this helpful and would love to hear your feedback at benchmarking@magnitudecapital.com.

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Indices

Funds and Companies