Investors tend to think of hedge fund managers as the superstars of the financial world. Collectively, it’s estimated they now manage somewhere in the neighborhood of $3 trillion. Unfortunately, their reputation hasn’t translated into the type of returns that live up to all the hype.
As we’ve continued to demonstrate over the years, the hedge fund industry has had a hard time keeping up. In fact, over the last 10 calendar years, 2004-2013, the HFRX Global Hedge Fund Index underperformed every single major domestic and international equity asset class. It even managed to underperform one-year Treasury notes, let alone longer-term Treasurys.
Despite this abysmal performance, marketing hype and hope is triumphing over wisdom and experience. Money continues to pour into hedge funds. It just goes to prove Abraham Lincoln’s belief that you can indeed fool some of the people all the time.
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