Hedge funds have consistently outperformed the S&P 500 over the past decade, right? That's the conventional wisdom. But the magnitude of the outperformance may be less than we think, given problems with index measures that are familiar to mutual fund pros.

Survivorship bias, Breakingviews notes, is an even bigger problem in the hedge fund industry than mutual fund industry because it tends to bite the dust at a higher rate. And then there's the issue of voluntary reporting. Fund firms do not have to report results. And when funds start tanking, they usually cease reporting. So how much does this affect the indexes' results? Burton Malkiel says that you should take 4 percentage points off the stated results of indexes.  

For more:
- here's the article 

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