During calmer market environments, correlations of returns can gradually rise as most investments benefit from a directionally positive market environment. However, during periods of stress, correlations tends to breakdown and may result in a wider dispersion of returns, as we show on the left. In this environment, hedge funds can take advantage of market dislocation to generate alpha. On the right, we show how this translates into equity market positioning relative to the S&P 500. We are specifically showing the hedge fund overweight and underweight by sector relative to the S&P 500, with hedge funds currently underweight those sectors expected to moderate/normalize the most.