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Illustration: Rebecca Zisser/Axios

Bad news has continued for the hedge fund industry this year. Overall hedge fund returns have continued to trail both the S&P 500 and a mix of 50% global stocks and 50% global bonds by a wide margin.

What's happening: There are too many hedge funds, and too many of them are using simple hedging and shorting strategies that don't work, Dev Kantesaria, founder and portfolio manager of Valley Forge Capital Management, argues. And that may be changing soon.

What we're hearing: "Hedge funds have a troubled future," Kantesaria tells Axios in an email. "The idea of controlling risk through financial engineering such as hedging and shorting is a broken model."

  • That was especially clear during the fourth quarter of 2018 when hedge funds broadly failed to deliver outperformance during the stock market's downturn, he says.

What's next: Kantesaria isn't calling for a full-on wipe out of the industry, but does expect new managers will increasingly be crowded out as dollars flow only to the largest hedge funds, or "those with $1 billion or more in assets, despite mediocre performance over the last decade," he says.

  • "There is a natural tendency for allocators to invest with the larger, well-known names even though they may represent less compelling stories than their smaller peers."
  • "Emerging managers are struggling to capture allocators’ attention in the crowded marketplace. Starting a hedge fund today as an unknown investor is a very difficult proposition."

Go deeper:

Go deeper

Gaming CEO calls on industry to help fight climate change

"Catalyst Black." Screenshot: Super Evil Megacorp

Gaming CEO Kristian Segerstrale is calling on leaders in his industry to take action on climate change, after completing a $1.4 million fundraising campaign this summer.

Why it matters: Gaming's pandemic-fueled boom creates an opportunity, and maybe even an obligation, to do some good.

3 hours ago - World

U.S. releases updated vaccination, testing rules for foreign travelers

Photo: Patrick T. Fallon/AFP via Getty Images

Foreign travelers will be allowed entry to the U.S. beginning Nov. 8 if they can provide proof of full COVID-19 vaccination with a shot authorized by the World Health Organization and a negative test within three days of departure, the White House announced Monday.

Why it matters: The updated guidance, which exempts children under the age of 18 from the vaccine requirement, is intended to provide further clarity for airlines and foreign nationals who have been restricted from traveling to the U.S. since early 2020.

4 hours ago - Sports

Unvaccinated athletes face 21-day quarantine at Beijing Olympics

Logos for the 2022 Winter Olympics at Yanqing Ice Festival in February 2021 in Beijing. Photo: Lintao Zhang/Getty Images)

Athletes, staff members and journalists at the 2022 Beijing Olympic and Paralympic Winter Games who have not been vaccinated against the coronavirus will be required to quarantine for three weeks, the International Olympic Committee (IOC) outlined in its newly-published "playbooks."

Why it matters: The quarantine period is longer than the Games themselves, meaning vaccinations or an earlier arrival date will be required to participate in or cover the Games.