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Barry Ritholtz

The Search for New Love in Hedge Funds

Too bad so many of them haven't learned that the chase is futile.
Money for nothing, or at least underperformance.

Money for nothing, or at least underperformance.

Photographer: Thomas Trutschel/Photothek/Getty Images

I am fascinated by what I have been calling the hedge fund paradox: For ages, all but the top funds have lagged behind benchmarks for one-, five- and 10-year holding periods. Despite this, many of these funds continue to attract a torrent of money.

Why is it that in the face of underperformance, investors still seem to love hedge funds?