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 is not a piece of fine feminine Spitalfields silk—but is of the horrible texture of a fabric that should be woven of ships’ cables & hausers. A Polar wind blows through it, & birds of prey hover over it. Warn all gentle fastidious people from so much as peeping into the book—on risk of a lumbago & sciatics.”
—Herman Melville (1819–1891)
“A monarch must sometimes rule even himself: he who wants everything must risk very little.”
—Pierre Corneille (1606–1684)
“When a man leaves his mistress, he runs the risk of being betrayed two or three times daily.”
—Stendhal [Marie Henri Beyle] (1783–1842)