APPENDIX

Integrating Market Correlation into Risk-Adjusted Return

Institutional and high net worth investors are increasingly looking at hedge funds, as their expectations for returns from their equity investments range anywhere from low to bleak. Essentially, they are looking for investments that are not correlated with the equity market and that can perform well in any environment—particularly when their long-only equity investments are not. As the world has become more global, and international markets more correlated, diversification has become more difficult to achieve and therefore more valuable.

If you are an investor with a significant exposure to the S&P 500 through traditional investments, which of the following hedge funds would be ...

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