Every Business carries risk, however, there is a common misconception into Hedge Fund risk.
Many individuals in the professional investment community believe Hedge Funds to be speculative investment vehicles which take highly leveraged, directional bets based on broad macroeconomic or market views. This tainted image is partly as a result of articles in the press which refer to Global Macro funds which opened the public’s eyes to other forms of Hedge Funds and the dangers of leverage but again distorted people’s views of the industry.
The reality is that the Hedge Fund industry is much more diverse and, for the most part, quite conservative. Most Hedge Funds are specifically designed to reduce risk and limit volatility. Global Macro funds represent a small part of the Hedge Fund universe which contains a diverse range of investment strategies. The leverage employed by most Hedge Funds is modest and some use none at all. This contrasts with the exceptionally high leverage employed by Global Macro funds.