Most major equity markets rallied in February, driving the Morningstar 1000 Hedge Fund Index up 0.3%. The Morningstar MSCI Hedge Fund Index eked out small returns as well, up 0.7%.

But large swings in risk aversion and a myriad of mixed signals from the economy made investors wary last month — and created problems for hedge fund strategies, said Nadia Papagiannis, an alternative investment strategist at Morningstar.

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