In the second part of an investigation into the risks and
rewards of hedge fund investing we look at returns and conclude
that the industry is doing pretty well
T he best performing hedge funds have built an enviable
reputation for providing their investors with more stable
returns, greater diversification and lower risks than
conventional equity and other investments. But critics often
suggest that hedge fund returns are literally too good to be
true and that once 'survivorship bias' is stripped out, the
returns are far less impressive.
They also say that hedge funds don't even do what they claim
to do and make money in down markets. They point to returns
over the recent bear market and rather unkindly say that hedge
funds are "cash minus fees". While these criticisms are not
without foundation, what is often forgotten is that they are a
whole lot better than other comparable...