Simply not true - there are plenty of areas where consistently good returns are generated, however they aren't the best and they aren't too consistent. The fir

Simply not true - there are plenty of areas where consistently good returns are generated, however they aren't the best and they aren't too consistent. The first hedge funds were successful because there was little competition, they could conduct things like arbitrage because no-one else was. The problem is that such strategies don't work generally with scale, and there is so much money in hedge funds that they can't all conduct such activity profitably and thus the opportunity is overcrowded. Some active traders maintain their advantage by having such a high built in advantage that they have effectively monopolised a specific area, often through using technology and data mining. They are happy to sit on their strategy and keep reinforcing it to keep that advantage. Finally there is the successful strategy of actually investing in companies over the long hall. Hedge funds don't do this, people like Warren Buffet do. Surprisingly few companies, even pension investors, properly do this (riding through bad patches without firing the investors for instance) and thus there isn't nearly as much competition as you would think - very few companies genuinely invest over a 10 year time frame for instance.