Despite an appalling 2008, the hedge fund industry spin continues. "Hedge fund returns averaged minus 17.7% in 2008. Managed futures, global macro, commodity and currency funds gave even better returns of 1.51% on average," cooed one commentator recently, comparing hedge fund returns to those from equity markets.

But what if we make a sensible comparison – against diversified funds?

Table 1: Comparative performance of hedge funds