A better bet is, "will the hedge fund have a profitable year in which the market overall is down". If you invest in the market as a whole, you need to be prepared to be in for 30+ years, especially with the levels of volatility we have seen in the last 10-20 years.<p>A hedge fund can make trades that don't depend on the direction of the market, which means you can access your invested capital even in a down year. Buying an index fund doesn't afford you that opportunity -- if you bought the S&P500 index before the whole mortgage meltdown, you would be out a lot of money now. In 30 years, you probably will have made your 10% per year, though.<p>(One thing to note, though, is that as an average investor, the trades that make hedge funds / investment banks a lot of money are really not available to you. To make any non-directional money these days, you need cheap capital, and nobody's going to give that to you. I know what sorts of trades pay my salary at an investment bank, and if I made them myself, I would lose money. That's the reality.)