Tags: Hulbert | hedge | funds | index

Hulbert: 'Invest in Index Funds,' Not Hedge Funds

By    |   Monday, 03 June 2013 08:56 AM

While hedge funds have been all the rage in recent years, their performance doesn't match their hype, says Mark Hulbert, editor of the Hulbert Financial Digest.

Since the October 2007 bull market high, the Dow Jones Credit Suisse Hedge Fund index, has gained only 3.3 percent annualized, he writes in The Wall Street Journal.

That's about equal to the 3.4 percent total annualized return during that period for the Wilshire 5000 Total Market index, which comprises all actively traded stocks.

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Hedge funds also have lagged the Vanguard Total Bond Market Index Fund, which generated an annualized return of 5.9 percent since October 2007, and gold, which jumped 13 percent annualized.

"A fairer comparison might be with all mutual funds and exchange-traded funds [ETFs], regardless of investment focus," Hulbert says.

"According to Lipper, the average annualized return of all funds it follows was 5 percent from October 2007 through the end of April — 1.7 percentage points a year higher than the average hedge fund."

Hulbert's advice? "Invest in index funds."

Since the bull market high, a portfolio with a 60 percent weighting in a stock market index fund and 40 percent weighting in a bond market index fund topped the average hedge fund by 1.9 percentage point a year, according to the Hulbert Financial Digest.

Speaking of gold, hedge funds and other speculators increased their net-long position in the metal through futures and options by 35 percent in the week ended May 28, the biggest gain since March 19, according to the Commodity Futures Trading Commission, Bloomberg reports.

"Physical demand for gold has been good, but it hasn't been enough to offset the losses coming out of ETFs," said Timothy Hoyle, director of research at Haverford Investments, which oversees about $6 billion of assets.

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While hedge funds have been all the rage in recent years, their performance doesn't match their hype, says Mark Hulbert, editor of the Hulbert Financial Digest.
Hulbert,hedge,funds,index
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2013-56-03
Monday, 03 June 2013 08:56 AM
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