What's going on?

Data from Bloomberg out on Tuesday showed a record number of hedge funds are turning down new investors � but honestly, it�s not you, it�s them.

What does this mean?

It might sound odd that a hedge fund would pass up on more money, but there are a couple of reasons it actually makes sense. For one thing, most funds only want to invest a set amount of cash in each of their strategies. If they have more than they need, they�ll either hold more in cash � where it�s not doing any work � or invest in assets that don�t actually meet the strategy�s goals. For another thing, some hedge funds pride themselves on their feeling of exclusivity, and they might simply be closing their doors to keep the riffraff at bay.

Why should I care?

For markets: This cloud has a silver lining.

Hedge funds have had a tough time of it since the global financial crisis, with nearly 12,000 of them closing their doors between 2008 and 2020. That�s because hedge funds � which aim to profit whether things go up or down in value � thrive on volatility, which has been hard to come by in that relatively unspectacular period of time. Last year�s antics might�ve provided some welcome relief, then: the pandemic drove a significant spike in volatility, and hedge funds� profits along with it.

For you personally: Passive is the way to go.

Hedge funds tend to be reserved for major institutional investors with money to spare, so you might be disappointed to hear that the industry�s profits are mostly off limits. But you might not be missing out on much: consider that if you�d invested in a (far more affordable) exchange-traded fund tracking the key US stock market index when it was at its lowest point in March 2020, you�d have made returns of nearly 95% since then (tweet this). That�s a return any hedge fund would love to boast�