The recent disruption in the world equity markets, shaken by subprime mortgage concerns in the US, provided a live stress test of the hedge fund industry.
August 2007 was the first month for a long time, possibly ever, that all strategies registered a loss. Not all hedge funds saw losses but the averages as captured by the various strategy indices reported by Credit Suisse Tremont and others did see significant falls.
This is not the way things are supposed to work. Hedge funds are supposed to be