Hedge Fund Returns for 2011

A poll was conducted on this website recently asking this question:
“In 2010 the year was rescued in performance terms by the huge injection of QE2. So the outcome was a reasonable year. Is there a Second Act to rescue this year? What do you think hedge fund returns will be for the whole of 2011?”
Most respondents were still looking for positive returns from hedge funds in 2011 – only one-in-six who took part in the poll were looking for flat or negative returns for the year.
Nearly three quarters of the votes were cast for either +2% or +5% returns, and only 8% of participants were looking for 7% or better returns for 2011 from hedge funds.  If the outcome was in the range suggested investors in hedge funds would probably be satisfied, with a couple of conditions. To give credibility to 5% returns from hedge funds, equity markets would have to be flat (or down on the year), and inflation would have to moderate between now and year end. How plausible are those conditions?