Bridge over ocean
1 November 2016 Financial Analysts Journal Volume 72, Issue 6

Why Hedge Funds?

  1. Stephen J. Brown, PhD

Institutional investors are fleeing hedge funds, which provided neither the high returns nor the protection from downside risk that were promised to investors before the financial crisis. Diversified hedge fund strategies have a place in a well-diversified asset portfolio, but diversification is not enough to satisfy the fiduciary responsibilities of institutional investors. The problem is that operational due diligence is expensive—and without appropriate due diligence, hedge fund diversification can be dangerous.

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