Question

what does the term backfill mean

Answer 1

The term 'Backfill' is also known as instant history bias. The term is used in the context of financial instruments like hedge funds and mutual funds. In this the fund manager does not list the fund on the index or in the market as soon as it is launched. Instead he/she waits for some time and observes the performance of the fund. If the fund performs well then the fund manager gets the fund listed in the index. Later, the historical information about the fund is filled. This is known as backfilling. The major feature of backfilling is that the fund manager has the option to choose when to get the fund listed. But this practice does not give the correct information about the performance of the fund historically.