Hedge Funds End '12 Up 5.5%

Jan 2 2013 | 3:48pm ET

Hedge funds lagged the broader markets for the fourth straight year in 2012, with estimated returns of about one-third the performance of the Standard & Poor's 500 Index.

The average hedge fund rose 5.5% last year, according to Hedge Fund Research. That's a good deal better than the average 5% loss suffered in 2011, but it was well behind the S&P500's 16% return.

Hedge funds have not beaten the broad-market index since 2008, when the S&P was down nearly 40%, while the average hedge fund was down less than 20%. It is the longest period of underperformance for the hedge fund industry since 1998.

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