Is the hedge fund, as we know it, dead? Fifteen years ago, they were the hottest investments around. Every pension fund, endowment, and foundation clamored to get into this elite club, willing to pay hefty fees for the prospect of outsized returns.
But much has changed since the financial crisis. Except for the top hedge funds, most have shown disappointing performance since 2008, not even beating stock index returns. It seems the edge many had in outmaneuvering the markets has evaporated in more complex times. Red Sox owner John Henry is shutting down the commodities hedge fund shop that made him rich, the latest in a line of big names to retire. Others have been ensnared in a federal insider-trading inquiry that has tainted the industry, revealing a host of players who used unfair, and illegal, tactics to notch big gains.