ETFs vs. Hedge Funds
December 24th at 2:53pm by John Spence
A simple ETF portfolio of stocks and bonds easily outperformed the average hedge fund again this year and without charging 2% management fees along with 20% of profits.
The HFRX, a widely used measure of industry returns, is up by just 3%, compared with an 18% rise in the S&P 500 share index, The Economist reports.
The S&P 500 has outperformed the hedge fund index nine years out of the past decade, according to the report.
“Exchange-traded funds allow investors to gain exposure to anything from gold to property to Indonesian firms, and they charge investors just a few basis points (hundredths of a percentage point) on the money they put in,” The Economist notes. “That compares with fees of 2% of assets and 20% of profits (above a certain level) typically charged by hedge funds.”
Somewhat ironically, there are several ETFs designed to mimic hedge fund strategies. The largest is IQ Hedge Mult-Strategy Tracker (NYSEArca: QAI). [ETF Chart of the Day: Hedge Funds]
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