Ideally, the manager would use the same instrument for the hedge as the underlying position. For
a forward position, a good hedge would be another forward trade in the opposite direction.
However, there are many times when this is not possible for many reasons. Then the job of the
manager is to figure out the next best instrument. For example, using futures to hedge a forward
position is quite common because the futures market generally moves in the same direction as
the forward market (e.g., when the spot price of crude oil goes up, both forward and futures
prices generally go up) and futures are a lot more liquid than forwards.