While hedge funds underperformed the S&P 500 (INDEXSP:.INX) and the MSCI AC World Index last year, those aren’t necessarily the best benchmarks to use for comparison since hedge funds have had lower volatility than equities in recent years, and a recent J.P. Morgan report argues that hedge funds generated alpha in 2013. Hedge funds grew to $2.63 trillion in global assets under management last year, with $376 billion in performance gains and $64 billion net inflows, now representing 2.6% of the universe of bonds and equities, passing the pre-crisis high of 2.3%.

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