Why Hedge Funds Couldn't Catch Up After a Strong Start

For the past 10 years, the Fed has generated an average return of 17.82% in the market, outperforming hedge funds and the S&P 500. This can be attributed to various factors such as the financial crisis, QE, and Zerp. The market experienced a significant downturn, but the Fed's intervention led to a historical average return of 7-8% per year. On the hedge fund side, increased competition and shrinking alpha pool affected their performance. Additionally, hedge fund returns depend on interest rates, and when rates hit zero, short positions became costly. However, recent years are showing a shift in hedge fund returns.