We've noted the expected rise of passive hedge funds. Merrill Lynch recently launched its Factor index. Goldman Sachs has launched its Absolute Return Tracker index in Europe and will likely move it to the U.S. When you note that hedge fund returns have basically been equal to the S&P 500 since 1993, the trend might seem a bit odd. But hedge fund investors are held in sway by the dream that some managers can really outperform. The problem is: To find them, you have to spread your bets. So you end up with the industry mean. If the industry mean isn't much better than mutual funds, you have to wonder if it's really worth it. Well, you know the mantra about past performance not being a predictor. It's that thought that keeps funds flowing into the hedge fund industry.

For more:
- here's a column in the New York Times