"Many investors think the perception of risk is greater than the actual risk,” the person said. “But knowing how to time adding to positions is very hard as a result.”
Investors may not be dumping hedge funds, but several were happy to express their recent displeasure.
The average hedge fund, as represented by the Absolute Return Composite Index, fell 0.16 percent in 2015, the third losing year in less than a decade.
“It takes someone very special to earn the high fees,” said one representative of a wealthy family. Hedge funds typically charge a 2 percent fee for assets managed and keep 20 percent of profit generated.
The person added that they had been slowly paring back their allocation to hedge funds and poor performance in 2015 only underlined the logic behind the move.
“These ‘brilliant’ guys,” the person said, “got tossed around like toy boats in a hurricane.”