The Economist – With bold promises of strong returns in good times and bad, hedge funds have seduced many an investor. But as often happens when a courtship develops into something more serious, blind love has been followed by a bitter let-down. Hedge funds first disappointed investors en masse in 2008, when the average fund fell by 19%. Since then they have struggled to beat the market (see chart). This year performance has continued to be lacklustre. The hedge-fund industry needs to produce outsize returns for the rest of 2011 if it is to restore its reputation.
A difficult year for many hedge funds may prove a fatal one for some
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