Choppy August tested hedge funds, and many stumbled

A SURGE in volatility. Plunging global stock markets. A surprise Chinese currency devaluation.

That was August, among the more eventful months for world markets since the collapse of Lehman Bros and the 2008 financial crisis. In theory, that's exactly the environment that hedge fund managers have been waiting for. After all, many hedge funds are marketed as helping to smooth out volatility while delivering superior risk-adjusted returns.

So how did hedge funds fare last month?