Hedge funds fail to beat US market

HEDGE funds have enjoyed their best year since 2013 – but still failed to beat the wider market.

The funds bet on price falls as well as rises, and seek to make their backers money whatever the economic climate. However, they have faced criticism for being expensive and failing to deliver.

Figures from research group HFR show that hedge funds generated returns of 8.5pc last year, up from 5.4pc in 2016 but far below the Us s&P 500 index. This returned 19.4pc in 2017, well above its long-term average of 8.75pc.

some that did beat the market included small funds Whale Rock Capital and Light street Capital, which managed 36.2pc and 38.6pc respectively, thanks to bets on tech companies including Chinese online shopping titan Alibaba.

one of the largest players, Tiger Global, had returned 27.5pc to the end of november. And in the City The Children’s investment Fund gained 28.2pc in a year that saw it try to force out the chairman of the London stock exchange.

Critics of hedge funds say it is far cheaper to just buy a tracker designed to follow a market index – and that this also usually offers better returns.