http://assetbuilder.com/andrew_hallam/couch_potatoes_crush_hedge_funds
Most telling part to me:
Despite how far the reported hedge funds have lagged the Couch Potato over the past decade, most hedge fund investors would be thrilled with these poor results—because the majority of hedge funds did worse than the hedge fund index average.
...yeah. I'll stick with index funds.
This is a poor treatment, with little true analytic value because of a cherrypicked subindex and no transparent methodology for comparison.
There surely are hedged vehicles that have underperformed their benchmarks, and they are often punished by their investors (increased redemptions, cries to increase the high water mark, etc).
Sadly, over the last decade, a public ignorance has been cultivated as a result of some high profile fund failures and management malfeasance.* The media and various groups on both sides of the isle pounded "hedge funds" and contorted the reasons as to why we choose to invest in them - all the while thousands of organizations used reputable vehicles for exactly their intended purpose.
Contrary to popular myth, some vehicles are engaged because of index like returns with vastly reduced volatility. For others, the appeal is to gain marked exposure to non-correlated assets with vastly different return characteristics than "stocks and bonds": venture opportunities, local debt or equity exposure (public or private), corporate restructurings, private real assets, etc.
For some institutions, and HNW individuals, the risk adjusted returns are, in fact, far superior to many opportunities afforded non-accredited investors. Is that unfair? Only if you discount that there exist index funds with essentially no management fees that would've been a HNW pipe two decades years ago. Hedged vehicles, and indexed ones, are intended for sometimes for similar purposes, but often for differing ones, such that simplistic comparisons, as in the posted article, are misleading, at best. The article smacks of total ignorance of the asset class and its subclasses.
*(Does anyone recall B Madoff's hedge fund? You shouldn't: he never ran one.)