SAN CLEMENTE, CA, June 20, 2005 - PPCA, Inc. a leading provider of technology based analytical products to investors and their consultants continues to garner attention for it's HedgePOD (Hedge Fund Portfolio Opportunity Distributions) offering. Hedge fund investment performance that was once previously impossible to evaluate is now available. Monte Carlo simulations take the guesswork out of performance evaluation by comparing what actually happened to what could have happened.
Despite the fact that peer groups are used by just about everybody to evaluate hedge fund performance, they are well documented to be very poor yardsticks primarily because hedge funds are unique, so the objective of homogeneity is unobtainable. Sure there's comfort in being a part of the herd. But smoking was also common practice not too long ago, demonstrating that popularity is not synonymous with good judgment. "Monte Carlo solves this uniqueness problem so even though it may sound like gambling it actually takes risk off the table," stated PPCA Ron Surz.
Hedge fund investors have thrown money at hedge funds because of their mystique, rather than because of any real confidence in manager skill. Investors ought to be asking two critical questions: (1) What does this manager do? and (2) Does(s) he do it well? Fund managers have gladly accepted these riches while obfuscating the 1st question and answering the second with credentials rather than performance. Due diligence answers the 1st question and Monte Carlo answers the 2nd by generating all possible implementations of the manager's strategy.
Performance evaluation ought to be viewed as a hypothesis test where the validity of the hypothesis "Performance is good" is assessed. To accept or reject this hypothesis, construct all of the possible outcomes and see where the actual performance result falls. "The hypothesis test compares what actually happened to what could have happened," added Surz.