The Sharpe ratio is widely used (by approximately 80% of professionals) to evaluate alternative funds. It is calculated by dividing the excess return over the risk-free rate by the portfolio's volatility. A ratio above 1.0 is generally considered satisfactory.

The Sortino ratio is particularly relevant for alternative funds because it only considers downside volatility, which is crucial for strategies with asymmetric return distributions. It is often preferred over the Sharpe ratio in such cases.

The AIFM Directive, which entered into force on 22 July 2013, created a harmonised European environment for AIF managers. It imposes strict rules, such as mandatory authorisation and risk management, while offering the European passport for marketing across member states.

The AIFM Directive offers several advantages, including the European passport that allows managers to market their funds across all EU member states. This facilitates access to European markets.

Indicators for alternative funds fall into two categories: those measuring performance (such as the Sharpe ratio) and those measuring risk (such as maximum drawdown).

Maximum drawdown measures the maximum loss suffered between a peak and a trough in performance, not just over a single day. It captures extreme risk and the resilience of the management process under adverse market conditions.

The Long-Short Equity strategy combines long positions on undervalued assets and short-selling positions on overvalued assets. It aims to generate returns regardless of market direction, with net exposure varying according to the manager's style (long bias, neutral, or short bias).

According to end-2017 data, hedge funds represent only 0.6% of AIF net assets in France, which total €688 billion. This shows that hedge funds are a very minor segment of the French AIF market.