"Any fundamental fund that CONSISTENTLY returns 15%+ is doing something shady" - Your thoughts?

The "return" number is not the only one that matters. Maybe you get this, since you use the word 'consistently.' It depends entirely on your definition of that word. Truly "consistent" 15% returns would be a return of exactly 15% each year, i.e. your vol = 0%, so your Sharpe = infinity. Obviously, that's not possible (that's sort of like what Madoff's returns looked like – the Sharpe obv wasn't infinity, but it was stupid high). If you're trying to see whether a strategy is shady or not, look at various risk:reward tradeoff metrics like Sharpe, Sortino, whatever. If someone's book has hit avg 15% for decades, but that's with something insane like 30% vol, that ain't impressive, that's just levered (i.e. a 0.5 sharpe is nothing to write home about). Now if someone is hitting 15% with like 5% vol (to use round numbers), that starts to look fishy (though could just be genius – that's always a possibility). So look at the Sharpe. I'm reluctant to say a specific threshold, but anything above, idk, like 1.5 is really really good. Above 2 or 3 is too good, perhaps... ;)

The person who mentioned 15% as shady either works at a whiney, untalented L/S fund and they're making excuses, or perhaps the operative phrase was 'consistent,' as in they were reminding you of importance of risk as determinant of final E(R) number. Hope that helps.

(vol = shorthand for 'volatility,' in case you are a rookie or outside biz)

Further to mb's comment, there are a few legit funds out there that have consistently delivered a Sharpe of arnd 2.5 on decent AUM. They are an exception, rather than the rule. Moreover, their capacity is structurally bounded by the amount of leverage they are able to deploy.

This is a bullshit statement. 15% is not that high if you are a good stock-picking HEDGE FUND. You can even do this with reasonable vol (e.g. ~10%) for 1.5 - 2 sharpe. Hedge funds are lowering return expectations to compensate for the fact that they have largely become more institutionalized and dumber (to be fair, lots more competition, etc).

It is true that only a few LARGE hedge funds have done this over time (many smaller ones which no one here talks about)

If you're not cheating, you're not trying.

You should talk about risk-adjusted returns to be able to see whether that high return is compensation for high risks. Constantly getting high risk-adjusted returns in the long run is suspicious but getting 15% returns for two decades with 30+% vol doesn't necessarily equal shady. Historical vol for US equities is something around 20% and return 8% (ish) so yes, you're still "beating the market". But on average half of investors beat the market. I happen to know a PM at small l/s fund who has returned on avg 12% for the last 5-6 years with vol of 10%. Nothing shady happening there but he knows that he won't be getting those return-risk profiles forever.