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Hedge funds get some heavy trimming

Investors are yanking millions out of the hedge fund industry, fourth quarter data shows. The trend will continue unless hedge funds start performing more effectively.

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Wally Santana/AP/File
Investors pulled nearly $127 million out of hedge funds in the fourth quarter, showing that investors are fed up with the funds' ineffective market performances.

Man, has this game gotten tough.  Anyone who tells you it's easy is a charlatan.

Even the supposed "best and brightest" in the hedge fund industry are struggling - and the investors are saying hasta la vista.

Here's Steve Eder at the Wall Street Journal:

Hedge-fund investors, rattled by lackluster performance, yanked more money from the industry than they added during the final months of 2011, data released Thursday showed.

The $2 trillion hedge-fund industry saw net investor withdrawals of about $127 million in the fourth quarter, according to data by Hedge Fund Research Inc. It was the first time investors had collectively pulled out more money than they put in since the second quarter of 2009, when the markets were still digging out of the worst of the financial crisis.

While the net withdrawals amounted to a tiny portion, 0.007%, of the industry's total assets, the pullback signals that some investors are losing patience. In each of the past three years, hedge funds' average returns have trailed the benchmark stock indexes, including the Standard & Poor's 500-stock index.

The amounts are small, but the chasm between large funds and small is widening.

It's not enough to just be a hedge fund anymore.  Now you have to actually perform.  Big shift.

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