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Hedge Funds Future: Time to ‘Separate Men From Boys’

CNBC: A once promising year for hedge funds has turned into another trudge through the muck, indicating that it may be time for the industry to rethink the way it does business.

Hedge fund returns for the first half of 2011 have hovered around 1.3 percent, underperforming most other asset classes, including stocks and bonds.

That comes after a solid 4.8 percent gain in the first quarter — the best performance in six years — triggered hopes that the $2.1 trillion industry was recovering from an abysmal 2011 with losses in excess of 5 percent, according to Hedge Fund Research.

But with an explosion of worry about European debt and the accompanying unconventional intervention from central banks, hedge fund long-short and macro strategies have been blown apart.

Long-short involves buying assets that managers think will do well and short-selling those they think will fare poorly. Macro strategy involves using economic theory to buy global assets.

Both have faltered as the market has gyrated and policymakers have pulled out multiple plans to stem the damage.

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