Geez I thought hedge funds were a compensation class, not an asset class. In mathematics the term Non-linear was in vogue for people wanting to look sophisticated. In reality most math is non-linear. Defining hedge funds as an asset class is a bit like defining a group such as all animals that aren't elephants. Cluster and style analysis etc. are all useful tools for FoF managers to justify fees. True exposure to a risk class shows up when the extreme event hits and all correlations hit -1 or 1. Then one can see if they were truly "hedged." Disclosure: I am in the business, I just haven't had enough of the Kool-aid yet.