More paltry returns from hedge funds

IT has been another year of paltry returns on expensive investments in hedge funds.

The average fund lost 4.4 per cent in the first 11 months of the year, data from Hedge Fund Research shows. This comes just three years after hedge funds lost an average 19 per cent in 2008’s market chaos, and raises serious questions about the industry’s future growth, particularly in light of the huge fees the managers often earn. “I’m disappointed at the level of returns,” said one large institutional investor who asked not to be named.

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“The hedge fund industry has once again been underwhelming people’s expectations.”

Hedge funds, which made money both in 2001’s tumbling markets and 2003’s rally, have been caught out this year by whipsawing markets and high volatility amid the eurozone’s prolonged and deepening debt crisis.