Hedge Funds Lag Behind a Generic Stock/Bond Mix

The $2.1 trillion industry lags behind a generic stock/bond mix
Photograph by G Fletcher/Getty Images

Before they discovered hedge funds, pension funds and school and foundation endowments typically held portfolios with 60 percent in equities and 40 percent in bonds. Many would be better off if they had stuck with that formula. Hedge funds have trailed both the Standard & Poor’s 500-stock index and a Vanguard index fund with the 60/40 mix over the past five years, according to data compiled by Bloomberg. “People hear about the top-performing hedge funds, and they assume those results hold true for the whole industry,” says George Sauter, chief investment officer for Vanguard Group. “It turns out that, on average, hedge funds are about average.”

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