Hedge-fund assets recently eclipsed $3 trillion. One of the more popular strategies for hedge funds has been the long/short equity fund.

Charlie Bilello, director of research at Pension Partners and the source of our chart today, writes:

The main selling points and objectives for the long/short strategy are twofold: 1) to outperform the stock market over the course of a market cycle through "alpha" generation or stock picking, and 2) to preserve capital during periods of market stress.

As the chart below shows, this no longer seems to be happening.

123639116

The hedge fund industry's ability to generate alpha seems to be inversely proportional to its assets under management.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Barry L Ritholtz at britholtz3@bloomberg.net