Alpha and beta [130 months]
 
Similarly to mutual funds, hedge funds should be evaluated  for both absolute an relative returns. An experienced investor usually has an intimate knowledge of stock markets. Therefore,  the comparison of Iris Investment  performance with a market as a whole might give  a valuable information to an investor  how to compose his  investment portfolio and  when to invest or disinvest from Iris. To this aim,  we propose to look at  alpha/beta parameters and their histograms.
 
The net return of the fund relative to the volatility adjusted return of the benchmark index is a fund's alpha.  A positive alpha of 1.0 means the fund on the risk-adjusted basis has outperformed its benchmark index by 1%. Similarly, a negative alpha of -1.0 indicates an underperformance of 1%.  The funds tracking benchmarks have, by the definition, alpha = 0. Every fund manager hunts for a positive alpha .
 
Beta is a measure of the volatility, or systematic risk of a portfolio in comparison to the benchmark index representing the market as a whole.  A beta of less than 1.0 means that the portfolio  will be less volatile than the market while beta greater than 1.0 indicates the opposite.  For example, if the funds  beta is 0.55  its portfolio is subject to the theoretical  price swings of only 55% of these  observed by  the markets.
 
Our choice  for a global benchmark is S&P 500.
 
Example: S&P 500 index grew by 97.05% between 31st August, 2010 and 31st March, 2015. Iris Investment beta was 0.55 and therefore, the risk-adjusted net return of Iris Investments was  expected to be  0.55 * 97,05 =  53,77%. The net return of Iris Investments over this period was in fact  120.17%.  The fund net return was by  120.17%-53.77%=66.4% greater than the market expectations, hence  the funds' alpha  66.40.
 
Alpha/beta and their evolution: 
 
      last 12 months       last 36 months  last 60 months
  alpha   2.12   -90.46  -107.74
beta    0.15      1.48       1.57
 II  gain      8.09%        -5.63%        55.08%

Practical advice: Investors often use both alpha and beta to judge a fund's performance. Investors generally opt for a high alpha and a low beta. But other investors might like the higher beta, trying to cash in on markets volatility. On the other hand, if the fund has a high alpha, but also a high beta, conservative investors might not be so happy. That's because the  beta might make them withdraw their money when the investment is doing poorly - due to the increased volatility of the markets,  the risk of losses becomes  elevated.