That article is basically saying that the traders do worse because they're stuck with back-office management and not only trading. That makes sense, but it doesn't make them worse at being traders. Maybe they only miss some of the info the banks were getting.
Hiring takes time too, doesn't it? Especially if you want to do everything right and delegate nothing.
I'll give you a quarter and say that managing a hedge fund detracts from trading, but you give me a quarter for the fact that it shouldn't interfere excessively with their generating alpha. How does that sound?
Once you are disconnected from the flow information and do not have an unlimited balance sheet to adsorb short-term fluctuations in your P&L, it's much harder to make money. Some of these people adopt, some would not.
Some run businesses better than others. There are guys that trade at the genius level that need someone to cut their meat and dress them in the morning. Even running a small business can throw some of them off their game. I know a guy who trades in excess of 500 contracts a day yet pays retail rates because he wants nothing to do with even the simple paperwork that any form of exchange membership would involve.
You'd think that these traders would be smart enough to self-select to managing a fund only if they thought these factors would not impact their ability to make money. Or, perhaps some of them looked at it purely from a short-term perspective and figured their ability to make money would be impacted, but the short-term boost to their compensation would be sufficient that even if they were exposed as poor traders, it wouldn't matter because they'd be laughing all the way to the bank. It's hard to think that they wouldn't have realized that they would lose access to certain information and have more constraints on their balance sheet, though. Anyone who puts two seconds of thought into it would realize that.
You underestimate the impact of ego on the business. Most managing director-level traders at a bank think that they have a special insight and can make money by simply punting futures. That's the nature of the business - ego, not skill, is what gets you promoted. Unfortunately, it seems that it's ego, not skill that gets you capital too.