ETFs vs. Hedge Funds

ETF Trends

A simple ETF portfolio of stocks and bonds easily outperformed the average hedge fund again this year and without charging 2% management fees along with 20% of profits.

The HFRX, a widely used measure of industry returns, is up by just 3%, compared with an 18% rise in the S&P 500 share index, The Economist reports.

The S&P 500 has outperformed the hedge fund index nine years out of the past decade, according to the report.

“Exchange-traded funds allow investors to gain exposure to anything from gold to property to Indonesian firms, and they charge investors just a few basis points (hundredths of a percentage point) on the money they put in,” The Economist notes. “That compares with fees of 2% of assets and 20% of profits (above a certain level) typically charged by hedge funds.”

Somewhat ironically, there are several ETFs designed to mimic hedge fund strategies. The largest is IQ Hedge Mult-Strategy Tracker (QAI). [ETF Chart of the Day: Hedge Funds]

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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