Think hedge funds mint money? Consider this: The Standard & Poor’s hedge fund index posted gains of just over 2.4 percent in 2005–after meager gains of 3.6 percent in 2004–or about half the performance of the S&P 500.
That track record hasn’t hurt the earnings of the average hedge fund manager, who took home about $1.2 million in 2004. But with the number of hedge funds–thinly regulated investment pools for the well-to-do–having mushroomed from a few hundred to more than 8,000 worldwide, with combined assets now around the $1 trillion mark, many investors are finding that storied hedge fund edge elusive. It’s pretty hard, after all, to make the case that all 8,000 funds are being run by the best and the brightest. And in such a crowded field, many of the tactics that have made hedge funds so profitable in the past are oversubscribed.
