Hedge Funds Work Worst When You Need Them

Two tidbits from an interesting Edhec study cited in the Financial Times today:

  1. “…nine out of 13 hedge fund strategies lost money in May, just as they did in April.”

  2. “According to Mercer Investment Consulting, the correlation of the CSFB/Tremont Hedge Fund index with the FTSE World Index is 0.5. But when equity markets are falling sharply, the correlation becomes 0.7. In other words, just when you want them to act as diversifiers, they fail to do so.”