Hedge Funds Have Worst Month In 5 Years, Underperform S&P 500

So much for the theory that hedge funds deliver "absolute returns" in any market environment, thus justifying their massive fees.

Hedge funds are poised to post their worst month in five years after bad bets on crude prices, home-builders, and financial stocks put many managers in the red. Worse, they're underperforming the S&P 500.

The S&P 500 is only down 1.8% so far in July. Hedge Fund Research Inc's Global Hedge Funds Index, meanwhile, is down 3.2%, which represents the greatest monthly decline in the index since it was started in 2003.

Some consolation for poleaxed hedge-fund clients: you'll only have to pay that 2% management fee.