They way things are now, it's looking like a dismal year for hedge fund performance.

The average fund fell 4.4 percent in the first 11 months of the year, according to data from Hedge Fund Research. Meanwhile, the Standard & Poor's 500 index is up about 1 percent for the same time period. Ouch!

Reuters offers an article titled: "Investors Falling out of love with hedge funds." It reports that "deep cracks are starting to show in the love affair between hedge funds and their investors, after another year of paltry returns on expensive investments leaves many feeling cheated and close to bailing out."

But I beg to differ. Limited partners of course are never happy when their funds underperform to the extent they have this year. But the big institutions are not about to give up on hedge funds. In fact, they will load up as much as possible, that is, as much as trustees will allow. In their minds, they have little choice as they face cringing future liabilities. While they are committed to the asset class, they will not be afraid to tweak their holdings.

This year, there were little in way of mass shifts, as the level of redemptions came in lower than one might have expected given the performance woes. The bottom line is that it's becoming a fund picker's game. There's been a huge variance in performance across funds--with some huge losers like John Paulson and some huge winners like Renaissance Institutional.

For more:
- here's the article

Related articles:
More big losses for John Paulson   
Hedge funds bail out of bank stocks  
Hedge fund compensation falls