Hedging Without Getting Clipped

Some funds offer the benefits of hedge funds without the high fees

to invest in an alternative investment that doesn’t follow the U.S. stock market too closely, then this may be an investment for you to consider.”

For mutual funds that can help diversify your holdings, Lon Morton, an investment adviser in Calabasas, California, recommends: Alpha Hedged Strategies and Merger funds, Schwab Hedged Equity Select, FPA Crescent, Hussman Strategic Growth, Analytic Defensive Equity, Robeco Boston Partners Long/Short Equity, and PIMCO All Asset All Authority. “If you put a few of them together,” he says, “you can get some of the benefits of hedge funds.”

Keep in mind that an investment in a hedge fund is ultimately a bet on the manager’s ability, and the same is true for hedge-like mutual funds. Before investing, look for evidence that a fund’s manager has a proven track record.

TOP hedge-like mutual FUNDS

Fund Name Ticker 1-Year Ann. Total Return* 3-Year Ann. Total Return* 5-Year Ann.Total Return* Initial Investment Toll-Free Number Expense Ratio
ICON Long/Short I IOLIX 9.15 17.29 NA $1,000 800-764-0442 1.74
FPA Crescent FPACX 10.54 14.67 18.58 $1,500 800-982-4372 1.4
Hussman Strategic Growth HSGFX 6.20 11.24 13.41 $1,000 800-487-7626 1.24
Robeco Boston Partners Long/Short Eq Inv BPLEX 20.19 7.18 11.33 $2,500 888-261-4073 3.17
Arbitrage R ARBFX 1.17 4.91 6.99 $2,000 800-295-4485 1.95
Merger Fund MERFX 1.84 4.51 1.86 $2,000 800-343-8959 1.87
Analytic Defensive Equity A** ANAEX NA NA NA $2,500 866-777-7818 NA
PIMCO All Asset All Authority A** PAUAX NA NA NA $5,000 800-426-0107 NA

*As of Nov. 30, 2006 Source: Morningstar Inc. Morningstar makes every effort to ensure the accuracy and completeness of this data, but cannot guarantee it. **Fund has operated less than one year.

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