Stats › Active, passive and flows › Hedge funds
Hedge funds against the index
Hedge funds are the corner of the investment world where it's hardest to get a straight number. The industry is enormous and the performance data is voluntary, which is an awkward combination, because the funds that stop reporting are generally not the ones that did well.
This page puts three things next to each other. How big the industry is right now, what happened in the most famous public test of hedge funds against a plain index fund, and what careful researchers found when they corrected the return databases for the way those databases are built. The third one is what I'd read first, because it reframes everything else on the page.
I put it together because hedge funds get argued about with slogans in both directions, and the real record is more interesting than either slogan. There's a year in the famous bet where the funds did exactly what they exist to do. There's a bias correction that strips most of the industry's reported advantage away and still leaves genuine skill behind. Everything is dated and sourced at the foot, including the places where two releases of the same index disagree with each other by a tenth of a point.
Global hedge fund capital reached a record $5.6 trillion at the end of the second quarter of 2026, after the largest quarterly increase in history. The industry's composite index returned 12.5% in 2025, its strongest year since 2009, and 7.5% in the first half of 2026. The two facts that matter most are older. Warren Buffett's ten year bet ended with an S&P 500 index fund up 125.8% against 2.8% to 87.7% for five funds of funds. And correcting hedge fund databases for survivorship and backfill bias cut the reported 1995 to 2009 return from 14.26% to 7.63% a year, against 8.04% for the S&P 500 over the same period.
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Below this point there are 9 sections, 1 chart, 1 table and 4 named sources, roughly 1850 words of it. Every figure carries the source it came from and the date the data is from.
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