Hedge funds outperformed over past decade

Over the past 10 years, hedge funds have trounced the main stock indexes. According to the Hennessee Group, the Hennessee Hedge Fund index gained 88.3 percent from January 2000 to December 2009, while the S&P 500 declined 23.3 percent, the Dow Jones Industrial average fell 9.30 percent and the NASDAQ Composite index fell 44.2 percent. 

Now when you factor in the management fees and performance fees, the margin of victory (so to speak) is significantly reduced. But still, I think we can pronounce hedge funds the winner. For stocks (long only), it has indeed been the "lost decade." The Hennessee Hedge Fund Index fell in only two years (2002 and 2008), while the S&P 500 fell in four years (2000, 2001, 2002 and 2008). Hennessee suggests that the ability to short was a key factor. In months when the S&P 500 fell, hedge funds participated in just 20 percent of the loss (a 0.8 percent drop for the Hennessee index versus a 4.2 percent loss for the S&P 500). The biggest category winner? Financial Equities funds, which actually did well in 2008 thanks to shorting. 

For more:
- here's the release

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