The average hedge fund returned 10.5% in 2010 according to Hedge Fund Research, which is well behind the S&P’s 15.06% (via MarketFolly).
Of course, not all hedge funds are trying to beat the S&P, but beyond that, it should be pretty obvious why they were, as a whole, such a laggard last year: The only real winning trade was to be straight-up long, and ideally leveraged.
Market neutral, long-short, etc. was all a loser because it was so toxic to have anything short-oriented in your portfolio (outside of a few rare exceptions).
Anything complex or subtle probably underformed straight up going long stocks.
According to Hedge Fund Research’s stats, notable laggards included Paulson, Citadel, and Paul Tudor Jones.