Risk
Because investments in hedge funds can add diversification to investment portfolios, investors may use them as a tool to reduce their overall portfolio risk exposures. Managers of hedge funds use particular trading strategies and instruments with the specific aim of reducing market risks to produce risk-adjusted returns, which are consistent with investors' desired level of risk. Hedge funds ideally produce returns relatively uncorrelated with market indices. While "hedging" can be a way of reducing the risk of an investment, hedge funds, like all other investment types, are not immune to risk. According to a report by the Hennessee Group, hedge funds were approximately one-third less volatile than the S&P 500 between 1993 and 2010.
Read more about this topic: Hedge Funds
Famous quotes containing the word risk:
“Anyone who takes himself too seriously always runs the risk of looking ridiculous; anyone who can consistently laugh at himself does not.”
—Václav Havel (b. 1936)
“It’s a funny thing, the less people have to live for, the less nerve they have to risk losing—nothing.”
—Zora Neale Hurston (1891–1960)
“A monarch must sometimes rule even himself: he who wants everything must risk very little.”
—Pierre Corneille (1606–1684)