Hedge Funds and Risks in the Diversified Investment Portfolio

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CFA Institute Conference Proceedings Quarterly
Third Quarter 2015 | Vol. 32 | No. 3 | 8 pages
Source: CFA Institute
Alexander Ineichen, CFA



The risks of alternative investments should be demystified. A variety of strategies are used by absolute return managers to hedge noncompensated risks—that is, exposure to accidents and losses. Investors should note the importance of the asymmetry of returns and compounding capital positively. Diversification is the only “free lunch” in finance, and combining alternative investments in balanced portfolios can result in considerable benefits.

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