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Hedge funds represent a diverse group of investment strategies that can offer investors enhanced returns, capital preservation, risk mitigation, and greater portfolio diversification across various market conditions.


Hedge fund managers have considerable investment flexibility. Unlike mutual funds, hedge funds are not publicly traded, allowing hedge fund managers to invest in stocks, bonds, commodities, currencies, futures, swaps, or other derivatives. In addition, hedge fund managers may use leverage to increase return potential, and/or short selling to help hedge the risks of individual stocks or a portfolio.

This ability to hedge market risk has historically resulted in hedge funds delivering greater risk-adjusted returns relative to public markets (particularly in down markets or periods of macroeconomic uncertainty) and reducing overall volatility when added to a portfolio of traditional stocks and bonds.1

Types of Hedge Funds

Hedge fund managers may follow a wide range of investment strategies that target an equally diverse range of investment objectives. These strategies include, but are not limited to:

Key Liquidity Terms Explained

While hedge funds are less liquid than ETFs and mutual funds, most offer liquidity on a periodic basis, subject to certain limitations.


icon-strategyHedge funds provide access to a broad array of strategies available to meet various investment objectives.

icon-opportunityHedge funds can offer an opportunity to pursue enhanced returns and/or downside protection, while providing diverse sources of return relative to traditional stocks and bonds.

icon-less-volatilityHedge funds have historically delivered greater risk-adjusted returns relative to public markets, particularly during periods of market volatility, high interest rates, and macroeconomic uncertainty.2

icon-key-in-handHedge funds are accessible to a greater number of investors given today’s innovations in product development and technology.


Key risk considerations may include, but are not limited to, the following:

icon-manager-selectionManager Selection: Not all hedge fund managers are the same. The experience, skill level, and track records of managers may vary greatly, and as a result, there can be a wide dispersion (or difference) in returns. It is critical to have a thorough diligence process in place to evaluate hedge fund managers.

icon-liquidityLiquidity: While hedge funds typically offer redemptions on a periodic basis, investors may be subject to a lock-up period which will prevent them from redeeming their capital for a period of time. In addition, investors must give written notice of their intention to redeem, with notice periods typically ranging from 30 to 90 days in advance. The manager may impose a gate, or a redemption limit, on the amount that can be withdrawn during a given redemption period.

icon-visibilityTransparency: Hedge funds may not offer the same level of transparency as traditional investments, which are required to provide frequent and full disclosures.

icon-feesFees: Hedge fund managers charge their investors an annual management fee, typically 1–2% of assets under management. Fund managers also typically charge an incentive, or performance fee, which traditionally represents 15–20% of fund profits.

icon-leverageLeverage: Hedge funds often use leverage, which offers the potential for higher returns, but may also increase volatility or downside risk.

icon-concentrationConcentration: Hedge funds may hold concentrated positions or focus on a specific market, sector, and/or geographic region.

Please contact your financial professional or a fund manager to learn more.


1. Source: eVestment, as of March 2023. Based on HFRI Fund Weighted Composite Index versus S&P 500 Index and Bloomberg US Aggregate Index, from Jan. 1990 to Feb. 2023. Past performance is not indicative of future results. Future results are not guaranteed.
2. Source: eVestment, as of March 2023. Based on HFRI Fund Weighted Composite Index versus S&P 500 Index and Bloomberg US Aggregate Index, from Jan. 1990 to Feb. 2023. Past performance is not indicative of future results. Future results are not guaranteed.


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