The world is finally beginning to wake up to the truth about hedge funds:
Hedge funds are, generally speaking, AMAZING wealth generators for the smart people who run them–and a complete rip-off for their clients.
Yes, there are a handful of hedge funds that have done spectacularly well for their clients. Whether these funds will continue to do spectacularly well for their clients is an open question–and it’s the clients who are bearing all the risk that they won’t–but it’s true that a handful have done well.
The vast majority of hedge-funds, however, just charge above-average fees for below-average performance (or worse).
But the good news for the world’s investors is that that word is finally beginning to get out.
The first chart shows the distribution of the “profits” that hedge funds generated in the 12 years through 2010. (You can quibble with Lack’s methodology and precise conclusions, but the overall picture is probably close to the truth.)