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Alternative to hedge funds in stocks and bonds

Stocks and bonds are being pushed as an alternative to hedge funds following the release of a study comparing the returns of each.

Research for Presidio Financial Partners claims that since 2000, a diversified portfolio of stocks and bonds earned an average annual return of 6.3 percent, compared to 5.2 per cent with hedge funds.

"The point is that as hedge funds become more popular, investors need to proceed with caution," said Jeff Spears, managing director of Presidio Financial Partners.

Hedge funds enjoyed a reputation for delivering exceptionally good returns during the 1990s, which has resulted in the industry expanding rapidly since then.

However, Presidio is skeptical about the ability of many of these new managers and claims that only one per cent of funds of funds and three per cent of individual hedge funds justified their performance fees.

Calling many of the managers "often mediocre or poor," Presidio urged investors to consider stocks and bonds, which only have a management fees and lack performance fees.