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Opinion
Barry Ritholtz

The Five Reasons Hedge Funds Underperform

Hedge fund performance -- and underperformance -- is an area of research I have been intrigued about for several years now. It is a complex, nuanced issue which many folks misunderstand.

" The $2.5 trillion hedge-fund industry, whose money managers are among the finance world's highest paid, is headed for its worst annual performance relative to U.S. stocks since at least 2005.

"The funds returned 7.1 percent in 2013 through November, according to data compiled by Bloomberg. That's 22 percentage points less than the 29.1 percent return of the Standard & Poor's 500 Index, with reinvested dividends, as markets rallied to records."