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