Hedge Funds Still…Stink

Another data point in the stream of information confirming that hedge funds are a lousy bet.  This latest is a study by Robert Arnott of Research Affiliates, as reported on his firm’s web-site:

http://researchaffiliates.com/Our%20Ideas/Insights/Fundamentals/Pages/F_2013_April_The-Lure-of-Hedge-Funds.aspx

Briefly, Arnott’s study shows that adding hedge funds to a portfolio systematically increases risk, and decreases returns.

Why do people keep buying an asset class with such high costs and low returns?  I think the answer remains the same — most investors are unhappy with the prospective returns in the financial markets, and smooth-talking salesmen convince them that higher returns are to be had in the hedge fund space.

As P. T. Barnum said, “There’s one born every minute.”

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