Too many hedge funds don't earn their keep. In the wake of feeble returns, the $3 trillion industry in the first quarter suffered its largest outflow of investor cash since 2009, according to Hedge Fund Research. It could be for the best. The high-fee model may be better suited for the periphery than the mainstream.
Warren Buffett was gleeful at the annual meeting of Berkshire Hathaway on Saturday. Eight years ago he bet the leading lights at the Protege Partners fund of hedge funds that, over a decade, the Index of U.S. stocks would outperform five fund vehicles of their choice. With just two years to go, Buffett's chosen Vanguard index fund is up 66 percent to the hedge funds' 22 percent.