Hedge Fund Managers, Nothing more than Major Index Huggers?

An interesting article was just released showing that in 2009 on average hedge funds returned 24.6% where the S&P 500 returned 26.5% in 2009. Now the thing to keep in mind is these are the Hedge Funds in the Hennessee Hedge Fund Index. the index is made up of about 1,000 funds calculated on an equal weighting, so by no means does this mean that all hedge funds were directly correlated with the S&P 500 in 2009.

I NEVER agree with just comparing anything to a single major broad market, as I feel risk mitigation is also essential in designing a portfolio. If you were in only the S&P 500 in 2008, you would have lost nearly twice as much as the Hennessee Hedge fund Index.

So if you had 100,00 to start 2008 an "Investor A" put it into the S&P 500 it would have lost 38.5% in 2008 then gained 26.5% for and ending value of about $77,797.50. "Investor B" put their money into the Hennessee Hedge Fund Index which lost 19.83% in 2008 then gained 24.6% in 2009 for an ending value of $99,921.72. Point being, limiting your downside risk is important as well, I would never recommend just putting all your money into any single index.

Just some interesting food for thought.

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