Research from the firm HFR Inc. shows that clients have withdrawn money from stock-picking hedge funds for three years running, the longest stretch of outflows since it began tracking data in 1990, according to a recent article in The Wall Street Journal.

“The reason isn’t hard to find,” the article says: “They’re no longer especially good at picking stocks.”

Between 1990 and 2009, the article reports, HFR data shows that stock hedge funds outperformed the S&P 500 by an average of more than 5 percentage points a year. But from 2010 through this September, those funds have trailed the index by an average of about 9 points a year.

The article cites comments from Jeffrey Vinik, who recently closed his hedge fund: “What I learned after probably 75 meetings is the hedge fund industry of 2019 is very different than the hedge fund industry when I started in 1996, and it’s even very different from the hedge fund industry when I closed in 2013.”

According to the article, those differences include:

• Volume: there were 530 hedge funds in 1990 with AUM of $39 billion. Today, there are more than 8,200 with $3.2 trillion of investor money.
• Quantitative and passive investing, managers say, has “distorted how stocks move and reduced the chances to profit.”
• Low interest rates reduce interest payments short sellers earn on cash they get when they sell borrowed stock.
• According to JPMorgan Chase, the portion of stocks traded by humans (on a macro level, not just at hedge funds) has dropped by about two-thirds since the late 1990s to about 15%.

According to Scott Warner of Paamco Prisma, a firm that “advises on or invests $23 billion of client assets in hedge funds, “holding your breath and hoping for change is not a strategy. The question is, ‘how are you adapting to the new reality?’ “