This paper examines in detail the literature review of hedge funds performance persistence. Hedge funds are also known as alternative investments that are suited to institutional investors or wealthy investors with significant experience and knowledge in investment. They are used to hedge different types of risk by using derivatives products. Hedge fund managers use call and put options, commodity futures, forward contracts, index, currency and fixed income options and futures to hedge credit risk, market risk, country risk, sector risk, company risk, interest rate risk and currency risk. They try to reduce risk, offset loses and positively increase the performance of the fund. They are not liquid as they use a lockup period for a certain period of time. They are used from wealthy investors that have a capital higher than 250,000 USD. In some cases the invested capital could be 1,000,000 USD or more than 10,000,000 USD.