Hedge funds post their best performance in their first two years, producing lower returns as they get older and larger, according to a study published today.

The study by PerTrac Financial Solutions, a software provider, finds that hedge funds less than two years old produced average returns of 11.7 per cent per year, while funds more than four years old returned an average 10.2 per cent.

The study includes data up to the end of last year.

An increasing number of investors are focusing on new managers in an attempt to secure higher returns. Many larger more established funds tend to be closed to new investment and can often have higher minimum investment criteria, making their barriers to entry greater than those for emerging managers.