A decade ago, the collapse of Lehman Brothers marked the psychological low of the 2008 Financial Crisis. Equity prices bottomed a few months later, in March 2009. Hedge funds had nimbly managed their way through the 2000-02 dotcom collapse, which led to substantial inflows over the next six years. By 2008 AUM had quadrupled, as less discerning investors piled in.

The strong returns from the 1990s through 2002 had come with a much smaller industry. Consequently, hedge funds were far too big when the 2008 collapse came, and losses wiped out all the prior years’ profits. It meant that in the history of hedge funds, aggregate investor gains were offset by other investors’ losses. Hedge fund managers had profited; the clients had not. If all the money that’s ever been invested in hedge funds had been put in treasury bills instead, the results would have been twice as good. The Hedge Fund Mirage Turns Five showed that the book’s prediction of continued disappointment was right.

Having rudely reminded investors in 2008 that they take risk, one might think that hedge funds would have gained from the subsequent rebound in risky assets. Endure the downside, participate in the upside. Since the low in 2009 the S&P500 has returned 17.9% p.a. With dividends reinvested, it’s increased almost fivefold. Although it’s unfair to expect hedge funds to beat long-only stocks at that level, they’ve missed by such a margin that one wonders who still seriously recommends an allocation to the sector. The Dow Jones Corporate Bond index has delivered 6.4% p.a., three times the 2.1% annual return of hedge funds, even with a decade of ruinously low rates. Although worse investments are hard to find, hedge funds handily beat a fund launched in 2009 to follow Dennis Gartman’s newsletter recommendations.

Nonetheless, hedge fund managers have continued to do handsomely. Some of the smartest asset managers run hedge funds and they are highly talented at separating clients from their wealth via fees (see The Alpha Rich List Got 15% of Everything). Try thinking of anyone who became wealthy by being a hedge fund client.