This morning’s precipitous decline in major equity indexes comes as no surprise to anyone, even if its the first Triple-Digit Decline in the Dow in 3 months.

Synonymous with big market moves, we think about what hedge funds are doing right now, and whether or not they’re exploiting ETFs as part of their hedging strategies. How prescient on the part of Pensions & Investments to issue a report yesterday “Hedge Funds mum about ETF use” in their effort to peel back the onion layers on hedge fund managers’ use of ETF products.

P&I reporter Christine Williamson delivers some good insight when writing:

Hedge fund managers are the 3rd biggest institutional users of exchange-traded funds and exchange-traded products; but they’re reluctant to talk about it.

Why? “Investors in hedge funds are paying big fees for active management equity selection. If a long/short manager goes long individual equities and only shorts ETFs and (indexes), it is a terrible deal for investors (because) fees should be a lot lower,” Jim Vos, CEO, head of research and principal at hedge fund consultant Aksia LLC, New York, said in an e-mail.

That said, In aggregate, about 17% of hedge fund short positions and 4% of long positions were made through ETFs, estimated Goldman Sachs researchers from the company’s global economics, commodities and strategy research unit. The data is from the company’s Feb. 21 edition of “Hedge Fund Trend Monitor” report.

Aside from warming up to the two UBS ETRACS, hedge-fund tailored ETNs launched late last year by Mark Fisher and Dennis Gartman (OFF) and (ONN), what are the most common uses of ETFs by hedge fund managers? Read the full story: