[bionsystem]

There are hedge funds beating markets over and over, some have been macro driven, some are equity driven, some are quant driven... Now of course it's a pareto law, only a handful out of 100 will get all the excess return and the others will stagnate or underperform indices (or even fail completely). But the same goes for building any company, most of them fail and we watch winners in awe.

[saberience]

Most hedge funds in fact DON'T beat the market though. In almost every case you would have been better to buy index funds and hold versus put your money in a hedge fund.

[bagacrap]

Correct. The true function of a hedge fund is not to beat the market over the long haul, which is generally impossible. The goal is to avoid losing huge amounts of wealth, for people who have way more money than they need. Hence the name --- you put money in there as a hedge against short term losses in equities.

[coliveira]

Most hedge funds don't beat the market, and this is widely known. Moreover, from the few that beat the market, some are involved in insider trading and other deceptive practices. From the remaining ones, a good portion can be explained by sheer luck.

[nerdponx]

I do wonder about using this same analysis to look at various funds' real returns (hedge and otherwise), in addition to the major indices in the study. I'd be curious to look at variance, downside risk during downturns, etc.

[nerdponx]

I realized that this is what https://totalrealreturns.com/ does. It seems like at least a few mutual funds do beat the market over time, e.g. FPURX: https://totalrealreturns.com/s/USDOLLAR,VTSMX,FPURX,FBGRX

[baby]

I remember reading this book pointing out that the big hedge funds that would repeatedly beating markets in the past ended up failing hard in recent years. That really nothing beats index funds.

[coliveira]

Some people will point to Warren Buffet, but he is not really a "normal" investor. Buffet only invests in a company after he talks directly to management and does a lot of analysis that is not available to normal investors. I consider him to be a legal insider trader.