FYI: When you think Vanguard funds, what words and investing concepts come to mind? You might think accessibility, low-cost, simple, and average returns.
How about hedge funds? They tend to have the opposite associations, such as high barriers to entry, high expenses, and above-average returns.
If you made all of the above assumptions, you’d be correct, with exception of the part about returns
Regards,
Ted
http://investorplace.com/2015/02/vanguard-funds-vs-hedge-funds-guess-wins/print
Comments
As often recognized on MFO, statistics can be often misinterpreted or plain wrong. It depends on the quality of the statistical study, on the randomness of the data sources and their population representativeness. Statistical data can cause much harm if the reporting agencies have hidden incentives.
The available Hedge fund data is suspect because of these incentive likelihoods. The Hedge fund data is mostly self reported. Many of these funds choose to not participate in any survey or do not survive to report. What segment of the returns distribution do you think are the non-reporters?
Therefore, it is highly likely that the data presented in the referenced article overstates the real average returns generated by all Hedge funds.
Their returns have been dismal recently because all market players are better informed, thus reducing any earlier competitive edges. Sustained positive Alpha is a disappearing quantity in today's marketplace. The challenge has become even more daunting with fewer and fewer persistent winners.
Best Wishes.