For the first time ever hedge funds can now be accurately and fairly evaluated. Performance evaluation is a hypothesis test, where the hypothesis is “performance is good”. The breakthrough is accomplished by applying the scientific principals of modern day statistics to test the hypothesis that hedge fund performance is good. Open any statistics book and you will find that hypotheses are tested by comparing the actual outcome of a process to all of the possible outcomes. If the actual outcome is high among all of the possibilities, the hypothesis that “performance is good” is accepted with statistical confidence.

HedgePOD (Hedge Fund Portfolio Opportunity Distributions) creates all of the possible hedge funds that could have existed through time in a specific hedge fund strategy. If an individual hedge fund performs well against the opportunities in its specific strategy then that fund has succeeded in delivering good performance, a statement that can be made with confidence since the outperformance has been identified with scientific rigor. Heretofore hedge fund success or failure could not be properly identified because each hedge fund is unique, and therefore without peers. Scientific Monte Carlo peer groups solve this problem.