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:
“If you think it will only add one sprig to the wreath the country twines to bind the brows of my hero, I will run the risk of being sneered at by those who criticize female productions of all kinds. ...Though a female, I was born a patriot.”
—Annie Boudinot Stockton (1736–1801)
“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)
“If you love the good thing vitally, enough to give up for it all that one must give up, then you must hate the cheap thing just as hard. I tell you, there is such a thing as creative hate! A contempt that drives you through fire, makes you risk everything and lose everything, makes you a long sight better than you ever knew you could be.”
—Willa Cather (1873–1947)