Contrary to the tagline in the Enterprising Investor email which linked to this article, all of the above would seem to make the fund selector's job hugely more complex and therefore more unlikely to be successful in the long run. One issue, briefly mentioned above but often under emphasised, is the liquidity issue. When trying to manage an overall portfolio the need to rebalance is one of the most effective tools a manager can employ but with the notice periods etc often required for hedge fund redemptions, this job becomes more difficult and in all probability less effective. The weight of evidence seems heavily against the hedge fund world much as it is against traditional long only active management. In terms of risk, investors are voting with their feet and saying we don't want to engage in the large number of risks that hedge and active strategies involve when the rewards are often fickle and frequently fail to even match, never mind surpass, more cost effective passive strategies.