Sure, great question.
It's important to note that 3 years doesn't mean 3 data points. It really depends on the funds average trade horizon. Which is, I think, exactly what you were referring to.
An HFT firm trades at such small scales that it can use its daily returns such that each year actually provides 252 data points.
On the other side of the coin, Berkshire Hathaway would need benchmark times longer than a single year.
I'm assuming the fund has holding times of around a week based on intuition and prior knowledge of alto of different fund investment structures.
The thing to understand about hedge funds is that most of them change investment strategies at some point in their lifetime such that historical records no longer really apply. This can happen for a number of reasons:
1) markets get crowded and force people to search for alpha somewhere else
2) funds get larger and existing strategies don't have the capacity to manage the new money.
3) traders leave and new traders have new ideas.
3 year is an industry goldilocks mark for comparing hedge funds. Not too long to take into account old strategies that are no longer employed and not too short that it doesn't allow the strategies to play out.
I cant' remember the exact number but Victor Haghani of LTCM fame talked about this and said it would be something like 143 years of data to know if a biased coin that comes up heads 60% of the time is biased to a 95% confidence level.
Obviously this isn't workable and as such we have to use smaller time frames.
See:
http://labs.elmfunds.com/pastreturns
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2856963