I roughly think of it as 1990-2000 lower risk, higher return 2000-2010 lower risk, same-ish return 2010-2020 lower risk, lower return (this is for long/short equity, other strategies may be a bit different but generally have declining alpha too)
Agree and disagree. Hedge funds are not supposed to “beat the market”. They’re supposed to deliver some beta (maybe) and some alpha (definitely). Outperform in bear markets and underperform in bulk markets. Unfortunately the average hedge fund does not even clear that low bar.
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its also not informative imo to look at hedge fund returns as an aggregate index… of course they underperform after fees in aggregate, active management is a zero sum game everyone can’t generate alpha together, some win and some lose
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“Active” doesn’t just include hedge funds though — in theory HFs could be winning in aggregate if active mutual, pensions, ETFs, retail etc are all losing. Although of course in practice all these groups are failing to beat the market so
End of conversation
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Hmm hedge funds are active investing strategies therefore need to outperform market regardless of the situation. And I am not even sure that their performance in bear market compensates the poor performance/losses during bull markets.
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