Abstract
This article investigates the performance of funds of hedge funds. A variety of methods is used to shed more light on different performance aspects. Multi-factor and single-factor models are used to explain excess fund of hedge funds returns. Cross-sectional regression analyses indicate that larger funds of hedge funds exhibit higher returns, lower standard deviations, higher Sharpe ratios, and higher alphas based on a multi-factor model. Performance persistence in fund of hedge funds returns is tested with a comprehensive relative efficiency measure based on data envelopment analysis. A rank correlation test based on the efficiency measure does not indicate any statistically significant performance persistence. <b>TOPICS:</b>Real assets/alternative investments/private equity, factor-based models, performance measurement
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