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Hedge funds beat index funds all the time. In fact, due to the averaging nature of index funds, I'd say about half the time a hedge fund will beat it (excluding

Hedge funds beat index funds all the time. In fact, due to the averaging nature of index funds, I'd say about half the time a hedge fund will beat it (excluding expense ratios) However, the same hedge fund consistently beating the index fund, that's unlikely. But things like ARKK certainly do exist and are funds that can beat the market for a few years, then they tend to regress to the mean.

mensetmanusman 5y ago
Saying hedge funds beat index funds is as helpful as saying some stocks beat index funds.
kwertyoowiyop 5y ago
On average, hedge funds perform worse than an S&P 500 index fund: https://www.reddit.com/r/market_sentiment/comments/p0emqj/do_hedge_funds_beat_the_market_i_analyzed_the/?utm_source=share&utm_medium=ios_app&utm_name=iossmf https://www.reddit.com/r/market_sentiment/comments/p0emqj/do...
- carnitine 5y ago
  Many hedge funds do not aim to beat the S&P500 so it’s a fruitless comparison.
  - mensetmanusman 5y ago
    I hadn’t heard this wasn’t a goal. What is the goal of a hedge fund then if the competition is a low cost asset that will likely outperform you?
    - malfist 5y ago
      Because past performance isn't a predictor of future performance, at least in the stock market. ETFs/Hedge funds can have particular features, like equity protection or exposure to a certain market or markets, instead of growth. You wouldn't expect a bond fund to out perform the total market index, that's not it's purpose. It's purpose is to protect your wealth in case of a downturn. Similarly, some hedgefunds (private equity and arkk are probably two good examples) that seek to find that rare 10X company that they can make millions or billions from, and are okay with generally losing most of their bets.
    - carnitine 5y ago
      There are many potential goals, for example: - Focus on a particular sector, if a biotech-focussed hedge fund is up 4%, SPY is up 7% and biotech stocks in general are up 1%, they have still outperformed. Clients will want exposure to that sector. - Tail-risk hedging, losing small amounts of money most of the time to make huge amounts during unlikely events. - Lower volatility, e.g. a fund which underperforms SPY slightly, but hedges against dramatic downturns in the market, so timing is not as important for redemptions. Sophisticated investors (the only people allowed to invest in hedge funds anyway) generally have more complicated requirements than throwing their money at an index fund and waiting decades to retire on the returns.

mensetmanusman 5y ago

Saying hedge funds beat index funds is as helpful as saying some stocks beat index funds.

kwertyoowiyop 5y ago

On average, hedge funds perform worse than an S&P 500 index fund: https://www.reddit.com/r/market_sentiment/comments/p0emqj/do_hedge_funds_beat_the_market_i_analyzed_the/?utm_source=share&utm_medium=ios_app&utm_name=iossmf https://www.reddit.com/r/market_sentiment/comments/p0emqj/do...

carnitine 5y ago
Many hedge funds do not aim to beat the S&P500 so it’s a fruitless comparison.
- mensetmanusman 5y ago
  I hadn’t heard this wasn’t a goal. What is the goal of a hedge fund then if the competition is a low cost asset that will likely outperform you?
  - malfist 5y ago
    Because past performance isn't a predictor of future performance, at least in the stock market. ETFs/Hedge funds can have particular features, like equity protection or exposure to a certain market or markets, instead of growth. You wouldn't expect a bond fund to out perform the total market index, that's not it's purpose. It's purpose is to protect your wealth in case of a downturn. Similarly, some hedgefunds (private equity and arkk are probably two good examples) that seek to find that rare 10X company that they can make millions or billions from, and are okay with generally losing most of their bets.
  - carnitine 5y ago
    There are many potential goals, for example: - Focus on a particular sector, if a biotech-focussed hedge fund is up 4%, SPY is up 7% and biotech stocks in general are up 1%, they have still outperformed. Clients will want exposure to that sector. - Tail-risk hedging, losing small amounts of money most of the time to make huge amounts during unlikely events. - Lower volatility, e.g. a fund which underperforms SPY slightly, but hedges against dramatic downturns in the market, so timing is not as important for redemptions. Sophisticated investors (the only people allowed to invest in hedge funds anyway) generally have more complicated requirements than throwing their money at an index fund and waiting decades to retire on the returns.