Hedge funds are ending the quarter giving investors less than they would have got from simply buying stocks and hanging on to them, belying their reputation as being at the cutting edge of money-making. In some cases they have provided less return than from a retail savings account.
It is a reflection both of getting caught by a reversing of investment flows from West to East and of being positioned for rises in financial markets when they suddenly turned choppy.
Investment arms at Wall Street banks look to have been similarly hit, prompting analysts to slash their estimates for first quarter earnings. Such underperformance does not bode well for the coming quarters if, as many strategists suggest, volatility rather than a set direction for markets is going to be the trend.
Gauging hedge fund success or failure can be notoriously difficult because of the plethora of styles they use. But one of the broadest measures shows at best a flat performance for the first quarter after March losses wiped out early gains. The HFRX Global Hedge Fund Index shows a year-to-date gain through Tuesday of just 0.03 percent, while its narrower index of equity-focused hedge funds has lost more than 3 percent.
These results compare with a year-to-date gain of around 1.6 percent for the MSCI all-country world index, over the same period, driven by gains in the region of 2.9 percent on the US S&P 500 index.
Most of the hedge fund losses - as well as weakness in global stock markets - have come in March, which saw a fall in risk appetite globally compounded by the Japanese earthquake.
The broad Dow Jones Credit Suisse Hedge Funds Index - whose annual average performance since 2004 is 9.45 percent - was up 2.08 percent for January and February, with its long/short strategy gauge rising 1.99 percent.
MSCI's global stock benchmark was up 4.3 percent for the year at that point. So hedge funds underperformed both on the way up and on the way down.
"You would have been better off buying an (equity) index and doing nothing this quarter," said Nick Bullman, a hedge fund manager and partner of risk advisory group CheckRisk LLP.
Hedge funds are a diverse bunch, so not all strategies have fared poorly.
Equity market neutral funds, which wouldn't have been caught out by a change in market direction, are up 1.7 percent, according to HFRX, while event-driven funds, which bet on events such as mergers and acquisitions, are up nearer 2 percent.