This has been an increasingly common story - as hedge funds have diviersified their client base to include a broader range of investors, the very strategies that gave the funds their name have started to fall by the way-side. Jon Birger, senior writer at Fortune magazine comments on this phenomenon in a longer article regarding investment diversification:

"Fewer and fewer hedge funds are doing what hedge funds are supposed to do, which is provide uncorrelated returns," says Pinkernell. It's not that veteran hedge fund managers forgot how to do their jobs. The problem is that the huge sums flowing into alternative investments have given rise to a new breed of hedge fund, one that's a gussied-up mutual fund masquerading as a hedge fund to collect gaudier fees. "If you think your hedge managers are just providing you with what you could get with an S&P index fund, then absolutely you should not be paying fees of 1.5 percent [of assets] and 20 percent [of profits]," says Tim Jackson, head of hedge fund research for Rocaton Investment Advisors.

More from Birger here. And for more on the narrowing gap between funds offering alternative and traditional investment strategies, check out this article from HedgeCo.net.

-- MDT

-- MDT