A Bloomberg dispatch quotes Simon Lack, author of The Hedge Fund Mirage:
"If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good."
Other studies have been slightly kinder, indicating long-term performance that lagged the S&P 500 by 50% or so. Certainly last year was one most fund managers are glad to be rid of. The average hedge fund dropped almost 5%. Long/short equity funds lost more than 7%.
Here is the mystery:
If hedge funds do this badly despite a growing number of arrests for insider trading, how badly would they have done without inside information?