Risk management

An investment with a fund of hedge funds manager allows investors to benefit from various levels of risk management. In addition to each manager’s own risk management, the fund of hedge fund provider will conduct its own risk evaluation for each manager and overall portfolio risk management.

Spreading of risk

Typically, a fund of hedge funds will include investments in a number of different strategies. These strategies aim to exploit different market opportunities. Combining a range of strategies creates the potential to make money in a wide range of market conditions and reduces the risk of over-exposure to any particular style of investing.

A fund of hedge funds manager may also invest in a number of different hedge fund managers. Each hedge fund manager possesses unique characteristics and is skilled in different investment areas. Combining the competitive advantages offered by each manager’s investment process reduces the risk of over reliance on too few managers.