Do hedge funds really provide a hedge to the market anymore?
Most hedge funds aren’t really truly “hedge” funds, they merely attempt to beat a market benchmark (ie: S&P 500). The term hedge fund has stuck even though most funds aren’t properly hedged, besides “hedge fund” is a snappier term to use.
There are a handful of hedge funds that got blown out of the water Oct/Nov 2018, not because they were hedged, but because they were NOT hedged in an overly leveraged position (using margin) who didn’t respect risk.
(Visual: driving a Ferrari w/ no brakes). It works for short periods of time like driving straightaway on the Autobahn, but if a sharp turn appears on the horizon, they get destroyed.