The hard truth about hedging


Aren’t hedge funds supposed to hedge? In 2011, as managers swerved in sync with the stock market’s wild swings, one might have wondered if hedging is a lost art. Maybe it is, as managers in many strategies — from equities and market neutral to event-driven and multistrategy — grappled with the thorny issue in a year of heightened volatility.

The performance of hedge funds since 2008 illustrates the problem: They failed to capture much of the upside in 2009 and then did worse than the markets on the downside last year.

That’s not