CNN – So far in 2012 investors would have done better putting their money in a low-cost stock index fund than the average hedge fund. In the first three months of year, the average hedge fund returned 4.6%, after fees, according to the Hennessee Hedge Fund Index. That was considerably better than last year, when the average hedge fund lost money, but it was still a lot lower than the Standard & Poor’s 500, which was up 12% in the same time.
Charles Gradante, who follows hedge funds for advisory firm Hennessee Group, says most managers of the private funds were caught off guard by the recent spike in stock prices. Coming into the year, Gradante says, many managers were still expecting stocks to drop. “Many of the managers seemed to have the opinion that the market was overbought,” says Gradante. Instead, the market had one of the best first three months of the year in history.
