Hedge funds are said to provide diversification through non-correlated or negatively correlated returns. This slide shows that hedge funds have provided downside protection during periods of market stress, circled in blue. During most of the periods of acute market stress over the last thirty years, hedge fund correlation to a 60/40 stock-bond portfolio has fallen to zero or below. Correlations came down in 2020, although not as far as during other periods of volatility, likely because market volatility during COVID was so brief relative to past downturns. Over the past year, correlations have fallen to historical levels, as a hawkish Fed and persistent inflation have created an extended period volatility.