If emerging market hedge funds lost big time last month, they may have only themselves to blame for not doing what they’re supposed to do best: hedge their bets. “We’ve seen things going extremely well in many markets for quite some time,” Jan-Erik Skoglun of London-based Gems Advisors said in a Bloomberg News interview, “All of a sudden, they’re facing a situation that they haven’t taken into account,” but should have. Because the bull was charging so strongly in emerging markets – and because it’s so expensive to borrow stock in those markets – most HF managers did not protect themselves with short positions, Rossen Djounov of Forsyth Partners in Dubai told Bloomberg News. “A lot of hedge funds, despite the fact that they’re called hedge funds, still have a ‘long only’ bias,” Tom Ashworth of KE Absolute commented to Bloomberg News. It is not clear if that was the case of some of the major May losers. The HFRI Emerging Markets Index was down 3.98%, its worst month since September 2002, though year-to-date the index was still up 10.7%. Among those hit hardest are Hermitage Fund (off more than 9%, but up 24% YTD), Pictet Targeted Fund Eastern Europe (down 14%, YTD up 3%) and Russian Prosperity Fund (down 15%, YTD up 15%). There is a silver-lining in this otherwise cloudy report: “Tests like this are good,” Ashworth says. “It will force manager to assess their hedging techniques.” A couple of funds apparently are already on the ball. Bloomberg News notes that Tiger Asia Overseas Fund “managed to rise” in May without giving a figure (but stating that the fund is up 30% through May 31) and GLG Emerging Markets Fund-Class A, which posted a 1% gain last month, is also up 30% YTD.