Hedge fund vehicles are increasingly used as investment devices for institutional investors. The key question is how reliable traditional performance are for this asset class, in particular, how certain statistical problems (lack of market values, autocorrelation of returns) affect the risk and return figures. We are particularly interested in the question how intentional “return smoothing” affects the published performance and risk figures, and what impact fund administrators have in this context. We finally analyse different methodological approaches to include hedge funds in asset allocation decisions, given their special risk characteristics.