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:
“When a man leaves his mistress, he runs the risk of being betrayed two or three times daily.”
—Stendhal [Marie Henri Beyle] (1783–1842)
“Do you want me to tell you something really subversive? Love is everything it’s cracked up to be. That’s why people are so cynical about it.... It really is worth fighting for, being brave for, risking everything for. And the trouble is, if you don’t risk anything, you risk even more.”
—Erica Jong (b. 1942)
“Risk! Risk anything! Care no more for the opinion of others, for those voices. Do the hardest thing on earth for you. Act for yourself. Face the truth.”
—Katherine Mansfield (1888–1923)