Hedge funds entered 2016 coming off their seventh-straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. And for the 10-year period ending 2015—one that included the worst bear market in the post-Depression era—the HFRX Global Hedge Fund Index managed to return just 0.7% per year, underperforming every single major equity and bond asset class.
Unfortunately for hedge fund investors, so far, 2016 has not been kind. As one example, a March 14 article in Bloomberg observed that since July, Russell 3000 Index companies in which hedge funds have the highest ownership percentage had plunged 31%, compared with just a 2.8% decline in the S&P 500 Index. The article also noted that Hedge Fund Research Inc. reported that a nine-month stretch in 2015 saw more hedge funds shut down than any time since 2009.
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