Basically the title. Hedge funds underperform every year as compared to broader ETFs like S&P500 by more than 10%! Given this, who invests in hedge funds? Are they stupid or am I stupid?
[https://www.aei.org/carpe-diem/the-sp-500-index-out-performed-hedge-funds-over-the-last-10-years-and-it-wasnt-even-close/](https://www.aei.org/carpe-diem/the-sp-500-index-out-performed-hedge-funds-over-the-last-10-years-and-it-wasnt-even-close/)
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One of the things hedge funds handle is volatility. You could be a pension fund that’s happy with 6% returns as long as there’s minimal volatility. That’s where hedge funds come in.
The 10% long term returns you see for SPY will include a year every now and then where the market is down 20% or so. Pension funds would like to avoid that and will compromise on long term returns to that end.
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