How can hedge funds not hedge?

With Tiger, many others being down 50% YTD, many others down 30+%. These funds are down 3x, 4x the 12% that SPY is down this year. How can these funds even call themselves “hedge” funds? The very notion of the word hedge is to maybe not outperform the market but to not lose as much during downturns. Can we just admit that hedge fund is a misnomer, and that many of them should be called “absolute return funds”?

These people were leveraged long the tech sector. They made risky, speculative wagers on a sector that paid off for a decade. That is more similar to a venture capital fund than a hedge fund.

 

This is exactly right. Hedging is not a requirement to be a hedge fund. SMs often don't hedge or hedge in a very limited way, i.e. "long-biased". MMs tend to hedge more aggressively, i.e. "market-neutral". Some hedge funds, especially in distressed, invest more like PE funds than anything else. I operate in the rates space and some funds are essentially long duration, and other funds have tight DV01 limits. It's a big world out there.

 

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