Morningstar Estimates Quarterly Returns for Hedge Funds

The company has estimated quarterly returns for approximately 1,700 hedge funds, including some of the largest and most prominent in the industry.  

Morningstar explained that although hedge funds do not have to publicly file disclosures, many entities that hold hedge funds, like registered funds of hedge funds, do. Morningstar culls information from these funds of funds using two types of filings to estimate returns—portfolio holdings disclosures and financial statements. From these filings, Morningstar collects the beginning market value of an individual hedge fund holding in a fund of hedge funds and the ending market value. If the fund of funds did not add or remove cash from the underlying hedge fund during the period, Morningstar can calculate an estimated return.  

When multiple registered funds of hedge funds hold the same hedge fund, Morningstar reports the median return as the estimated performance. Morningstar also lists each individual performance estimate related to the fund as well as the name of the registered hedge fund investor. Performance estimates of a fund may vary from one investor to another due to differences such as fees.  

Morningstar has approximately 11,000 hedge funds and funds of hedge funds in its database. Estimated hedge fund returns are currently available as a licensed data feed and will be available in Morningstar Direct, the company’s Web-based global research platform for institutional investors, in the coming months.