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 the only new thing we have to offer is an improved version of the past, then today can only be inferior to yesterday. Hypnotised by images of the past, we risk losing all capacity for creative change.”
—Robert Hewison (b. 1943)
“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)
“Combining paid employment with marriage and motherhood creates safeguards for emotional well-being. Nothing is certain in life, but generally the chances of happiness are greater if one has multiple areas of interest and involvement. To juggle is to diminish the risk of depression, anxiety, and unhappiness.”
—Faye J. Crosby (20th century)