Not one of the 13 hedge fund strategies watched by the Edhec-Risk Institute kept track with the United States stock market in 2012.
The result must present a challenge to hedge fund providers, which are seeking capital for investment vehicles that typically charge much higher fees than other funds.
The top-performing hedge fund strategy in Edhec's list, distressed securities, returned 13.2% in 2012, while the worst-performing strategy, short selling, returned a loss of 19.3%.
In contrast, the S&P 500 index, which investors can access cheaply with a low-cost tracker or exchange-traded fund (ETF), returned 13.4% in 2012.
The good performance of the S&P 500 may yet continue, as the index is already up more than 4% this year.
Not every stock market performed as well as the US in 2012. The FTSE 100 rose 5.8% during the year, less than eight out of the 13 strategies tracked by Edhec.
| Hedge Fund Strategies | 2012 performance |
| Convertible Arbitrage | 9.2% |
| CTA Global | -2.3% |
| Distressed Securities | 13.2% |
| Emerging Markets | 9.9% |
| Equity Market Neutral | 3.1% |
| Event Driven | 9.6% |
| Fixed Income Arbitrage | 8.8% |
| Global Macro | 3.6% |
| Long/Short Equity | 7.6% |
| Merger Arbitrage | 4.4% |
| Relative Value | 9.2% |
| Short Selling | -19.3% |
| Funds of Funds | 4.3% |
However, the MSCI World index, which consists of 24 developed-market country indices, returned 13.2% in 2012, equal to the best-performing hedge fund strategy in Edhec's list.
Despite hedge funds' mixed performance, data from US-based Hedge Fund Research, which runs a database of alternative investment vehicles, says hedge fund assets rose to a record $2.25 trillion (€1.7 trillion) in the final quarter of 2012.
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