Many financial market participants think of hedge funds as occupying rarefied air and investment newsletters as occupying the dank basement.

“Well, guess what? The newsletters this year are handily beating the hedge funds,” writes MarketWatch columnist Mark Hulbert.

The average newsletter, tracked by his Hulbert Financial Digest, produced a 9 percent investment return in the first 11 months of the year, easily beating the 5.5 percent return for the Hennessee Hedge Fund Index.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

When it comes to the last decade, hedge funds are ahead, but just barely. The Hennessee Index generated a 6.6 percent annualized return, compared with 6.3 percent for the average newsletter.

And it’s not as if hedge funds turn out to be the uncorrelated asset that many of their marketers claim. Using Hennessee Group data, Hulbert found that during the last 20 years, hedge funds had a 0.8 correlation with the Wilshire 500 stock index.

That’s not too impressive, given that a score of 1 means perfect correlation and negative 1 means perfect lack of correlation.

Investors with prominent hedge fund manager Marc Lasry of Avenue Capital Group don’t have to worry about overcorrelation.

He has doubled his cash holding to 25 percent of his portfolio, twice the normal level, because of concern about the fiscal cliff, Fortune reports.

"There is going to be a lot of nervousness, and the markets will go down," Lasry says. When they do, he says he will be a buyer.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.