We have looked at the dispersion of returns in the Eurekahedge data base of hedge fund strategies from 2000 through the first half of 2017 to get some idea of the dispersion in performance and the potential for regret.
However, the data get very interesting once you move to strategy specific analysis. We conducted a simple analysis by asking the question, "How many times is a strategy the best performer or the worst performer in a given year?" We are looking at nine strategies over 17 years, so there are a total 34 best and worst events. All things equal, there is a 1/9 chance that a strategy will be worst in any given year. Clearly, more volatile strategies are more likely to be the best or worst, but we want to focus on the potential for regret.
If you pick the best what is the likelihood of that strategy being the worst, or what is the chance of being the worst for any hedge fund choice. This can be explored more deeply, but I present just the counts for best and worst. The winner for most times being at the extreme is managed futures followed by distress. Four strategies have three times been the worst. Only managed futures had been five of seven times the worst performance strategy. Distressed followed by managed futures had the most frequent number of best strategy performance.
Given the extreme good and bad performance for managed futures (CTA's), there may be a wariness by investors relative to multi-strat or macro which are more likely to always be in the middle of the pack with performance. A focus on regret is real given the chance to end up "wrong" with a strategy choice.