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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the returns of the hedge funds include “fees, costs, and expense”. for a big investor, a lot of these expenses can be waived or lowered. for the average simpleton, then yes, it’s better off just investing in the index fund.
also, that report only includes a very tiny selection of a few hedge funds, there are many out there that we just won’t know the performance of, because they aren’t telling anyone.
but in general, it’s possible for hedge funds to seriously out perform the market because they aren’t constrained in what they can invest in. for example some hedge funds got in on (or maybe even caused) the crypto boom.
so at the end of the day. hedge funds can be akin to “nontraditional medicine or dietary supplements or magic weight loss pills”. many believe in it, many will call it scams, many will try it, it will work for some and not work for others. but at the end of the day, there’s no hard science/data to back any of it up.
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