Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap picks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read more details here). This strategy also managed to beat the market by double digits...