Putting Hedge Funds in Their Place

Abstract

Alternative investments, and hedge funds in particular, have received an increasing amount of attention as current market conditions have caused investors to seek opportunities outside of the traditional equity and fixed income universe. This article acknowledges that while hedge funds are appropriate investments for many investors, they defy clear definition and should be considered in the context of a diversified investment portfolio. Great care should be taken to determine the nature of the investment, the strategy(ies) employed, the associated risks, and the effects on portfolio performance, tax liability, volatility, and liquidity.