For all the talent that has flocked into the hedge fund industry, the link between higher returns and hedge funds is somewhat weak statistically. The latest nuance comes from John Griffin, of the University of Texas, and Jin Xu, of hedge fund manager Zebra Capital. They have also found that the long stock-picking ability of hedge funds may not be much better than stock mutual funds. They note the average hedge fund turns over its portfolio about twice as much mutual funds and prefers smaller stocks. Of course, this is precisely why institutions flock to hedge funds; they have enough long exposure to plain-jane stock funds. Still, the lack of performance is troubling. The study was based on hedge fund managers' quarterly filings with the Securities and Exchange Commission, showing long equity positions between 1986 and 2004. So it looks like short and other strategies were not considered. 

For more:
- here's a brief from Financial News