An essential component in the analysis of (hedge) fund returns is to measure its performance with respect to the group of peer funds. Through the analysis of risk-adjusted return percentiles an answer is given to the question how many funds are out-performed by the focal fund. In case all funds perform equally well, this approach will lead a random number between zero and one, depending on how lucky the fund is. We use the false discovery rate approach to construct relative performance ratios that account for the uncertainty in estimating the performance differential of two funds. Our application is on hedge funds, which leads us to develop a test for equality of the modified Sharpe ratio of two funds. The effectiveness of the method is illustrated with a Monte Carlo study and an empirical study is performed on the Hedge Fund Research database
