Between January 1998 and July 2012, hedge funds had impressive returns of 5.40% annually, with a risk-adjusted “alpha” of 1.8 percentage points, according to financial theorist William Bernstein in Skating Where the Puck Was.

But the return has been awful lately, with the alpha around -4.5% annually between 2008 and 2012. While hedge funds returned a positive 7.4% in 2013, they badly lagged the U.S. stock market return of 33.4% from a total stock index fund.

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