Wealthy investors may get more bang for their buck if they invest with brand-new hedge fund managers, but they must also have a strong stomach to tolerate potential losses, according to a study released Wednesday.
Data from research firm Preqin show that the average hedge fund manager who set up a firm within the past six years delivered average annualized returns of 8.80 percent in the first three years of trading.
That compares with a gain of 5.38 percent for new funds launched by established firms.
The average hedge fund has gained only about 6 percent this year, according to Hedge Fund Research, while the Standard & Poor's 500 index is up 27 percent.
(Read more: Hedge funds play buy-and-hold, and lose: Report)
"Our data show that as an investor you can generate outperformance by putting money with brand-new managers if you can tolerate the risk that goes along with it," said Tim Friedman, head of U.S. operations at Preqin.
One-fifth of new managers took losses in their first year of trading, and those losses tended to be steeper than declines at other funds, Preqin showed.