It was an upstart hedge fund that pitched large returns in periods of market turbulence by relying on a complex and controversial trading strategy. At the height of the 2008 financial crisis, investors would have had a gain of more than 600 percent, according to projections in investor documents for the new hedge fund, Spruce Alpha. But when markets again turned volatile this August, Spruce Alpha, which had started in April 2014, failed to turn the turmoil to its advantage. For that month — a particularly difficult period for many money managers — Spruce Alpha fared worse than most, losing...