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Hedge funds had their best year since 2009 but still can't keep up with the stock market

Andrea Riquier

If not in 2020, when?

Hedge funds had their best year in over a decade in 2020, but still lagged broader measures of stock-market performance, according to a report published Tuesday.

The Eurekahedge Hedge Fund Index (link) gained 11.77% for the full year, the industry group said. That compares to an 18.4% return for the S&P 500 and a 44.92% gain for the technology-oriented Nasdaq Composite index. Eurekahedge's North American index also fell short, gaining 14.82%.

Hedge funds using a tail risk strategy did best in 2020, returning 32.23%, followed by long volatility strategies, which rose 23.57%.

Read next:This chart shows investors' tectonic shift away from stock pickers (link)

As many market-watchers have noted, if ever there was a moment for active managers to shine, it should have been 2020 (link), with its once-in-a-generation market upheaval. In fact, 2020 did mark something of an improvement for hedge funds: in 2019, they returned a woeful 8.9% (link), compared to the S&P 500's 28.9%.

And some active managers made 2020 work for them (link). The Ark Innovation ETF(ARKK), the flagship exchange-traded fund run by Cathie Wood's company, gained 152.82% last year.

But the winning streak for passively-managed strategies compared to expensive active managers has been intact for some time. 2020 was the best year for hedge funds since 2009, when they returned 21.22%, Eurekahedge said. That year, the S&P 500 gained 26.46%.

Read next: The years-long shift from active to passive is still going, and Dan Draper has a front-row seat for it all (link)

-Andrea Riquier; 415-439-6400;


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01-12-21 0912ET

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