Often, investors will discover a manager after he's had a terrific run, usually when he lands on a magazine cover somewhere. Invariably, funds swell up with new investor money just before they revert to their long-term averages.

Investors tend to discover 'hot' mutual fund managers just after a successful run and just before the inescapable force of mean reversion is about to kick in.

A hedge fund manager whose clients demand monthly performance reports has different needs than any individual investors with a 20-year time horizon. The needs of that long-term investor differ markedly from someone who is retiring in three years.

Despite all the media coverage, glitz and glam of hedge funds, they have not done well for their investors. They have high - some say excessively high - fees; their short- and long-term performance has been poor.

Hedge funds are not especially liquid. Many are 'gated' - meaning there are only small windows when you can withdraw your money. They typically have a high minimum investment and often require investors keep their money in the fund for at least one year.

Yearly data put the rest of the noise into perspective. Most of the weekly or monthly random up-and-down movements get smoothed out. Ultimately, this is where long-term investors should be focused.