Hedges are employed across asset classes to manage downside risk, reduce volatility, or lock in profits. Common techniques include short-selling, options, futures contracts, or currency overlays. Effective hedging requires understanding of correlation, liquidity, and execution cost — including slippage. Hedge Funds derive their name from this principle, though not all actively hedge today. A well-structured hedge can protect against tail risk and is often incorporated into mandates and compliance frameworks. Allocators may analyze a manager’s hedging tactics as part of Operational Due Diligence (ODD).