A Familiar Story: Hedge Funds Lag Again
For the privilege of paying exorbitant fees, investors in hedge funds have suffered the indignity of underperforming a simple indexed stock/bond portfolio yet again. ETFReplay reports that year-to-date, hedge funds as a whole are showing a gain of around 1% while a simple 60/40 stock bond portfolio has appreciated over 6%. Longer term studies have demonstrated hedge funds to be poor investments [link]; also over 7 years [link].
One of the great mysteries in the world of finance is why anyone would invest in hedge funds given fees that while, supposedly falling, still reportedly average over 1.5% annually along with a performance fee of over 15% [Source: Hedge Funds Review]. This userous level of fees virtually eliminate any gains to the investors in the average hedge fund.