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:
“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)
“The effect of liberty to individuals is that they may do what they please: we ought to see what it will please them to do, before we risk congratulations.”
—Edmund Burke (1729–1797)
“We saw the risk we took in doing good,
But dared not spare to do the best we could
Though harm should come of it”
—Robert Frost (1874–1963)