The researchers of the Oxford and Duke University tracked changes to statements of historical performance of over 18,000 hedge funds recorded in publicly available hedge fund databases, at different points in time between 2007 and 2011.

They found that as many as 40 per cent of funds (around 7,000 individual funds) revised their previously reported performance, sometimes many years later, with more than a fifth of funds later changing a previous monthly return by at least 0.5 per cent, a university release said.

Their analysis also reveals that, on average, funds that revise their histories subsequently underperform significantly, when compared with funds that have never revised their reported performance.

The researchers say that unreliable disclosures could be interpreted as a valuable signal for current and potential investors about future hedge fund performance.

Professor Andrew Patton, Dr Tarun Ramadorai, and Michael Streatfield, suggest that changes they detected to statements of historical performance are not random or mere corrections of earlier mistakes.

Rather, they found these revisions were clearly associated with the characteristics and past performance of hedge funds.

Their analysis finds that revisions are more common among more volatile, larger, and less liquid funds.

Ramadorai, from the Oxford-Man Institute of Quantitative Finance and Reader in Finance at the Said Business School at Oxford University, said: "Our research highlights the unreliability of the voluntary disclosures that have hitherto been made by hedge funds on their performance track records".

"The benefit of mandatory, audited disclosures of past performance to investors and regulators is that it would enable them to accurately assess the real risks and returns of hedge fund investments".

Professor Andrew Patton, Associate Professor of Economics at Duke University, said: "Our analysis suggests that mandatory, audited disclosures by hedge funds, such as those proposed by the SEC, would be beneficial to investors and may help to prevent negative outcomes for current and potential investors".

Ramadorai added: "There are significant concerns among hedge funds about the impact of the new rules. But in the light of our findings, they may not go far enough: the disclosures will only be seen by regulators rather than by the general public, so would not be seen by the prospective investors in hedge funds".