Instant History Bias

Categories: Mutual Funds,

An inaccuracy recorded in a fund's performance record. This occurs when new successful funds report their numbers, but new unsuccessful funds close and their returns are not factored into the fund's (or fund manager's) overall performance, creating a positive bias in returns. This is a known and relatively common problem in assessing the returns of hedge funds due to their commonly short-lived nature, and the high number of new entries and departures. Also called backfill bias.