The total value of assets being managed by the hedge fund industry has hit a new all time high. According to the Eurekahedge Hedge Fund Index for the month of November, the total assets under the management of hedge funds has hit $1.97 trillion, beating the previous $1.95 trillion record set in the days leading up to the 2008 financial crisis.

The new recorded may be heralded as a watershed for the industry, but there are still massive problems for the investment vehicles. Performance has not been up to scratch for the last couple of years, and some high profile players in the industry have been on the wrong end of massive trades.

Hedge Funds In Recovery

The Eurekahedge Hedge Fund Index rose by 1.37 percent in the month of November, with distressed debt funds being the best performers in the industry. Total net inflows for the year reached $122.2 billion in the month of November. The hedge fund industry is looking relatively strong from the November report, but that doesn’t mean the industry is performing as well as its investors would hope.

The hedge fund industry has been one of the fastest growing sectors of the financial industry in the last couple of years, despite relative under-performance across the board. There are around 1200 funds that have returned more than 15 percent so far in 2013 according to the Eurekahedge report. It’s clear from the average that these funds are a minority, and they are still lagging the wider stock market indices.

Hedge Funds Still Lagging

The S&P 500 gained around 2.8 percent in the month of November, beating the gains in the hedge fund index by a large margin. The Eurekahedge Long/Short Equities Hedge Fund Index gained just 0.97 percent in the same period. The only hedge fund strategy to beat the index in November was Eurekahedge Fixed Income Hedge Fund Index, which gained 7.28 percent in November.

Regional hedge fund performance promised few better results. Eurekahedge Eastern Europe & Russia Hedge Fund Index lost 5.68 percent in November, and none of the regional hedge fund indices managed to beat the gains of the S&P 500. North American funds finished the month up 1.18 percent.

There is a clear under-performance in the hedge fund sector, and these results are calculated before fees are removed. After fees are deducted, it may be difficult for investors to figure out what they’re paying for. Hedge funds are supposed to be tweaked so that they perform well in bad times and good, but they haven’t shown an ability to do either with consistency.

For investors it’s all about choosing the right hedge fund. It’s clear that a broad look at the industry is disappointing, but some funds are better than others, and some offer unique exposure. Investors need to decide for themselves whether or not a hedge fund is worth it. For most, the fees make the returns look less than appetizing, especially when compared to a booming stock market.