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:
“Better risk loss of truth than chance of errorthat is your faith-vetoers exact position. He is actively playing his stake as much as the believer is; he is backing the field against the religious hypothesis, just as the believer is backing the religious hypothesis against the field.”
—William James (18421910)
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“It cannot in the opinion of His Majestys Government be classified as slavery in the extreme acceptance of the word without some risk of terminological inexactitude.”
—Winston Churchill (18741965)