In 2006 returns for many hedge funds are below those of safe Treasury bills.

Judge for 2006 up to late September, or the recent trailing period. True if data show a substantial share of hedge funds (many, not necessarily most) earning returns below 3-month Treasury bill yields (about 4.5–5% in 2006) over that period. Mostly true if this holds for a meaningful but smaller set, or over a slightly different period. Mostly false if only a few funds, or only particular strategies, underperformed T-bills. False if hedge fund returns generally and clearly exceeded T-bill yields, with very few funds below them.

Set before the research began.

1. E1 FRB: H.15 Release--Selected Interest Rates--September 11, 2006 Board of Governors of the Federal Reserve System · 11 September 2006

   “3-month 4.87 4.84 4.84 4.80 4.84 4.93 4.96”

2. E2 Hedge Fund Returns Relatively Modest But Consistent in 2006 Family Wealth Report · 16 January 2007

   “Greenwich Alternative Investments' global hedge fund index ended 2006 up 12.07 per cent, according to a report released by the group.”

3. E3 Changes in Hedge Fund Investment Behavior and the Impact on Financial Markets Bank of Japan · December 2006

   “but still remains around 10% (see Chart 2).”

4. E4 Hedge funds' returns for the year aren't worth high fees, long lock-ups Maryland Daily Record · 30 June 2006

   “As of June 20, a Diversified Hedge Fund Composite calculated by Merrill Lynch was up 3.42 percent for the year to date.”

5. E5 Hedge funds' returns for the year aren't worth high fees, long lock-ups Maryland Daily Record · 30 June 2006

   “The average U.S. equity long/short hedge fund was doing worse, down 0.45 percent.That doesn't look too great at a time when nearly risk-free three-month Treasury bills are yielding near 5 percent.”

6. E6 Changes in Hedge Fund Investment Behavior and the Impact on Financial Markets: Position Concentration, Expanded Scope, and Market Liquidity Risk Bank of Japan · December 2006

   “Monthly rates of return for May and June 2006 (Credit Suisse/Tremont Hedge Fund Index) were -2.84% and -1.01%”

7. E7 Hedge funds' returns for the year aren't worth high fees, long lock-ups Maryland Daily Record · 30 June 2006

   “For instance, the Dow Jones Distressed Securities Benchmark was up 6.60 percent through June 20, which looks much, much better than the Standard & Poor’s 500, which was up 2.27 percent for the same period.”

8. E8 Twenty Per Cent of Hedge Funds Losing Money This Year FamilyWealthReport (Clearview Financial Media) · 20 September 2006

   “around 20 per cent of the nearly 650 hedge funds that provide an unnamed (for regulatory reasons) Swiss bank with performance data have posted negative returns so far this year.”

9. E9 Returns dwindle as hedge funds crowd market Economic Times (India), reprinting a Business Week-style feature · 4 December 2006

   “As of September 30, the average hedge fund was up 7.1% in 2006.”

10. E10 FRB: H.15 Release--Selected Interest Rates--September 25, 2006 Board of Governors of the Federal Reserve System · 25 September 2006

    “Treasury bills (secondary market) 3 4 4-week 4.66 4.64 4.64 4.63 4.64 4.64 4.70 5.08 3-month 4.82 4.82 4.81 4.79 4.80 4.81 4.81 4.96”

11. E11 Twenty Per Cent of Hedge Funds Losing Money This Year FamilyWealthReport (Clearview Financial Media) · 20 September 2006

    “Thirty-one of the 40 funds monitored are losing money this year including a 30 per cent fall for the Whitney Japan Select Fund.”

A report from 20 September 2006 says about 20% of nearly 650 hedge funds tracked by a Swiss bank had negative returns so far that year (E9). It also says 31 of 40 funds in another monitored group were losing money (E12). Three-month Treasury bills were yielding about 4.8% at the time (E2, E11), so every fund with a loss was below T-bill returns, and funds with small gains would add to that group. The average hedge fund was up 7.1% through September 30 (E10), but the criteria require only a substantial share of funds below T-bills, not most of them, and the evidence meets that bar.