Hedge Funds by Risk
chart illustrates a general classification of risk in relation to
hedge fund styles.
classifying a hedge fund, an important measure to consider is the
degree of exposure to the broad movements of the market. This will
have a direct influence on anticipated returns. Generally, hedge
funds are set up with specific parameters so investors can forcast
a risk/return profile. As illustrated by the chart, the more "directional"
a fund, the more volatile, and a higher potential return.
Funds in this class are very aggressive and may be able to profit
in many types of market environments. They are opportunistic in
nature, very often Global/Macro players.(See Strategies/definitions)
Traditional Long/short strategy with portion of portfolio hedged.
This means the remaining portion is not.
These funds emphasize consistent, but moderate returns. They avoid
risk and seek low volatility. Strategies include:
event: risk arbitrage, distressed securities
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