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It depends what the volatility is. The S&P hasn't dropped below about 14% vol this year, and looks to have been about 18% on average.

If a hedge fund returns 15% at 10% volatility that is much, much better than the market.

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why is the volatility a factor ? My intuition say that you with high volatility is a lot easier to pick the wrong equities. Is that correct ?

There are two ways to compare returns. Higher returns at the same risk or the same returns at lower risk. Either is better.

volatility is the de facto measure of risk for a portfolio/trading strategy (there are more measures but vol is common). People tend to measure performance on a risk-adjusted basis (for example the Sharpe or Information Ratio) because in an ideal world an investor could theoretically lever/delever a portfolio to a level of risk they are comfortable with. All things being equal a higher Sharpe ratio would give you more returns for the same amount of risk as a portfolio with a lower Sharpe ratio.

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