Salient to Investors:

Hedge funds returned an average of 7.4 percent in 2013, trailing the S&P 500 by 23 percent and for the 5th straight year. The Bloomberg Hedge Funds Aggregate Index is down 1.8 percent from its July 2007 peak.

Jay Rogers at Alpha Strategies Investment Consulting said hedge funds will always underperform the S&P 500 in a year like this because they are hedging, and anyone with any kind of short position last year had bad performance.

Multistrategy hedge funds increased 6.8 percent, macro managers fell 2.2 percent, and long-short equity funds rose 11 percent in 2013.

Hedge funds beat US stocks in 2008, when they lost a record 19 percent and the S&P 500 declined 37 percent. Hedge Fund Research said hedge funds outperformed the index by the most when they returned 31 percent in 1993 versus 10 percent increase for the S&P.

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