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:
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.”