America's high hedge fund hopes: Are they smoking crack?

Americans are betting that hedge funds will make them rich even at a time when these once high-flying portfolios are lagging behind the broader market, which once again brings us to a basic question: what are Americans smoking or worse, snorting these days?

Research firm Morningstar Inc. polled 600 advisers in August and found that 65 percent of them expect more than double-digit growth in alternative investments, which include hedge funds; and 67 percent of them report that more than 10 percent of their clients are already using alternative investments.

"We were surprised to find that the majority of advisers expect double-digit growth in alternative assets under management every year for the next five years," said Steve Deutsch, director of separate accounts and managed investments at Morningstar.

This year hedge funds returned roughly 7 percent in the first nine months of the year, lagging behind the average stock mutual fund, which is up roughly 8 percent and the broader Standard & Poor's stock average, which is up about 12 percent. Expectations for high returns might be unrealistic (No shit Sherlock!) .

http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2006-10-24T192419Z_01_N24208661_RTRUKOC_0_US-FINANCIAL-FUND-HEDGES.xml