Businessweek has an interesting article about hedging without a hedge fund.

Hedge funds-private investment pools that cater to wealthy investors-have gotten plenty of buzz in recent years for their sophisticated strategies and exclusive allure. Nevertheless, typical investors probably can't meet the lofty investment minimums and high fees that hedge funds demand. Enter hedge-like mutual funds (see BusinessWeek.com, 12/12/05, "Funds Made to Deliver").

Like hedge funds, these mutual funds strive for top-notch returns in any kind of market. Some hedge-like mutual funds can give a portfolio extra diversification-and reduce overall risk-because, as with commodities or real estate, their returns usually don't correlate with the broader stock market. "If you've got a longer time horizon and you want to provide some diversity to your portfolio, a hedging instrument would be a good addition," says Philip Edwards, managing director of Standard & Poor's Investor Services.

These funds may be good for smaller investors to keep as a percentage of their portfolio, but my guess is that the extra regulations involved may crimp returns. Part of the reasons hedge funds are so successful is their unique status with respect to securities regulations.