The Reality of Hedge Funds

Abstract

Press reports have portrayed hedge funds and their role in market volatility inaccurately, according to the authors. They seek to bring clarity to the debate concerning hedge funds - what they are (and are not), and how they work. Upon looking at typical hedge fund structures and strategies in some detail, they conclude that hedge funds are attractive investment vehicles, particularly when viewed in a portfolio context. Hedge fund performance has, in the main, been strong. In 1998 in particular, hedge funds as a group outperformed many common performance benchmarks.