Long-short funds flopped during slump

Chicago Tribune- Maybe plain-vanilla stock and bond mutual funds will do the job after all.

Long-short funds — the newfangled mutual funds designed to give common investors a hedge fund experience and protection during downturns — recently went through one of their first major tests. And they flopped.

In July and August, with investors concerned over subprime loans and a credit squeeze, the benchmark Standard & Poor’s 500 stock index went down 9.4 percent. Long-short mutual funds — which are designed to hedge risk by betting on some stocks to rise and others to fall — went down 8.4 percent, according to Lipper Inc., a mutual fund tracking firm.

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